Writing in the Financial Times, IEA executive director Marina van der Hoeven says that if President Obama refuses to raise restrictions on exporting crude and liquid natural gas, the country’s unprecedented oil boom will dry up.Here’s the situation: technically, American companies are not allowed to export those products, as a result of a Carter-era executive order restricting trade of commodities in “short supply” that’s still on the books.
This wasn’t really a problem until recently, as American oil and gas production has gone nuts.
Most have been getting around this by exporting “refined products” instead. That’s been a boon for refineries, but not for the rest of the industry, van der Hoeven says.
Effective as US refiners may have been in mopping up the additional supply and sending it overseas, they have limited capacity to absorb additional barrels of high quality light, low sulphur oil. Much of their capacity is geared to processing cheap, low quality dense, high sulphur grades and maximising their yield of high-value-added products such as gasoline and diesel.
Technically, this bottleneck (and subsequent supply glut) has led to lower WTI crude oil prices, as we’ve previously discussed.
But as van der Hoeven says, many American end-users have not really been able to benefit from the situation since the prices they pay are tied to the international Brent benchmark.
Van der Hoeven concludes:
While new pipeline links, supplemented with increasingly efficient railroad links, will give producers short-term relief from depressed prices, new export outlets will ultimately be necessary to leverage the full potential and reap the benefits of the new American oil revolution.
Read the whole piece at FT.com.