Shale Daily / Rockies/Other / NGI All News Access

Analysts See Increasing Odds of End to Crude Export Ban

An end to the nation’s 40-year-old ban on crude oil exports appears to be in sight as the issue -- a top priority for Republicans and industry advocates -- has become a bargaining chip in ongoing budget negotiations in Congress.

Multiple news reports over the past several days have indicated that Congress is considering an end to the export ban as part of larger negotiations over an omnibus spending bill needed to keep the government open.

Where analysts had once thought an end to the export ban would be politically unlikely given Democratic opposition, the latest budget talks have altered the outlook somewhat, as indications are that Democrats might budge on lifting the export ban in exchange for a package that also extends tax credits for renewable energy.

Charles Ebinger, a senior fellow at the Washington, DC, think-tank Brookings Institution, told NGI’s Shale Daily on Tuesday that the odds of the ban being lifted as part of current talks are “better than I would have [thought] a week or two ago.” He said he now sees a 60-70% chance of a compromise that ends the ban.

“The real thing is whether they can get the Republican votes to agree to extend the tax credits for wind and solar energy as part of a deal,” Ebinger said.

Earlier this month, ClearView Energy Partners LLC rated the likelihood of the current Congress ending the ban at 15% (see Daily GPI, Dec. 3). This week, the firm updated its outlook, saying that an agreement on medium- to long-term extensions for wind and solar tax credits would mean “better-than-even odds” for an end to the ban. If the GOP won’t agree to extend renewable tax credits beyond two years, it is significantly less likely that Democrats will vote to end the ban, ClearView said.

Other policy issues could still get in the way, and “a renewables-for-exports trade isn’t a done deal by itself,” the firm said.

Despite disagreements over how long the renewable tax credits should be extended, Ebinger said he thinks “there’s enough support that I would certainly put it in the positive column as likely to happen.

“But will it make much difference? Contrary to a report we did a couple years ago, where we thought it would lead to the possibility -- at least down the road -- of substantial oil exports, I don’t think it’ll make much of a difference at all. In fact, I think you could actually see the near-term effect of [driving] down the price of oil a little bit more,” Ebinger said. “And the reason for that is the market is so glutted that I think it would be highly unlikely to see more than 50,000-100,000 b/d come into the market.”

Describing the practical market impact of an end to the ban as “a collective sigh of nothingness after the contentiousness of debates the last several years,” Ebinger said the most likely export destinations for U.S. crude would be nearby markets like the Caribbean or parts of Latin America, where transportation costs would be lower.

The likelihood of a muted market impact amid the current energy glut could make it more politically feasible for Congress to vote to end the ban now, according to Ebinger.

“That’s a good time to change bad policies, when it doesn’t have any impact,” Ebinger said.

Industry groups and Republicans in Congress have been lobbying to end the exports ban for some time now (see Shale Daily, July 8; March 23, 2014).

Rep. Joe Barton (R-TX) spearheaded efforts to pass legislation ending the ban in the House earlier this year (see Daily GPI, Oct. 8; Sept. 17). And Barton added an amendment to the recently-passed House energy bill that would end the export ban (see Daily GPI, Dec. 3).

Sen. Lisa Murkowski (R-AK), who chairs the Senate Energy and Natural Resources Committee, has also been vocal in her support of lifting the ban (see Daily GPI, May 13; March 4, 2014).

A spokeswoman for the American Petroleum Institute (API) said the group wouldn’t comment until after current negotiations have concluded. But API has advocated strongly for lifting the oil export ban.

“America is now the world’s top oil and natural gas producer, and updating our policies for a new era is critical to harnessing the jobs and economic potential unleashed by America’s energy renaissance,” Louis Finkel, API executive vice president for government affairs, said earlier this month. “Study after study shows that America’s energy exports will drive job creation and protect our allies...during negotiations with hostile nations.”

Travis Windle, a spokesman for the Marcellus Shale Coalition, also expressed support for lifting the ban.

“Very rapidly, the United States’ energy outlook has shifted from scarcity and weakness to abundance and strength,” Windle said. “Common sense natural gas, [natural gas liquids] and crude oil trade policies that level the playing field across highly competitive global energy markets will strengthen our economy, encourage investment and enhance domestic security.”

ISSN © 2577-9877 | ISSN © 2158-8023

Recent Articles by Jeremiah Shelor

Comments powered by Disqus