Louisiana, U.S. consumers could see dampened benefit from lifting oil export ban _lowres

 

Congressional leaders appear ready to lift the nation’s four-decade ban on exporting crude oil, drawing mixed opinions about its immediate benefit to Louisiana and U.S. consumers because of rampant global production and already-low oil and gasoline prices.

The U.S. House is slated to vote Friday on a federal funding bill that’s expected to include a provision removing the export ban, which was put in place with a few exceptions in December 1975.

Proponents say decades-old concerns about fuel shortages and long lines at the pump associated with that era are outdated. Oil giants have pushed for the change — until recently thought to be out-of-reach — by arguing that ending the embargo will help spur job growth and add tens of billions of dollars to the nation’s economy by allowing the U.S. to export oil overseas, potentially lowering international crude prices.

“This is a smart, commonsense policy change that represents a big win for Louisiana and our vital oil and gas industry,” said U.S. House Majority Whip Steve Scalise, of Jefferson, who has advocated for the change. “Lifting the ban will create thousands of jobs here in Louisiana and nearly 1 million jobs nationwide, while lowering prices at the pump and strengthening our national security. America is the only country in the world with a self-imposed ban on exporting our own crude oil, and it’s time we got rid of this obsolete, job-killing barrier once and for all.”

The abundance of low-cost energy brought on by new drilling technologies, coupled with oil prices that have fallen from $110 a barrel to $35 in the past 18 months, has put renewed focus on the ban but also could dampen the affect of lifting it.

Some economists offer tempered expectations and contend lifting the ban would’ve made more sense a few years ago before oil prices fell and exporting lost some of its shine.

Gregory Upton, an assistant professor at the LSU Center for Energy Studies, believes that promises of huge economic windfalls are “grossly overstated.”

“When viewed holistically, basic economic principles alongside the data paint a very humdrum picture for both proponents and opponents of the export ban,” Upton said in a report last month. Upton found that ending the ban is unlikely to lead to major economic benefits for Louisiana since the price differential between domestic and foreign crude has narrowed.

There also is a glut of oil on the global market.

For example, oil prices and energy stocks skidded Wednesday after the U.S. government said oil stockpiles grew 4.8 million barrels last week. The price of oil has plunged to its lowest levels in more than six years because supplies continued to rise as the global economy struggles.

Benchmark U.S. crude dropped $1.83, or 4.9 percent, to close at $35.52 a barrel in New York on Wednesday. Brent crude, a benchmark for international oils used by many U.S. refineries, lost $1.26, or 3.3 percent, to $37.19 a barrel in London.

Despite the hand-wringing over lifting the export ban, the immediate impact for consumers is expected to be minimal, experts say.

Tom Kloza, chief oil analyst at the Oil Price Information Service, said it will have “virtually no impact” on gasoline prices, noting that most studies — some by academics, think-tanks or paid for by the energy industry — have predicted only modest price declines of a few cents per gallon, which fall within regular ebbs-and-flows of the market.

U.S. regular retail gasoline cost $2.16 per gallon in November, down 13 cents from a month earlier and 75 cents lower than a year ago.

“This would’ve been big news in 2011 or 2013, when the rest of the world had a squeeze on light sweet crude,” the kind commonly produced in the U.S., he said. “Conceivably, if there were not an export ban, we would’ve exported a lot of light crude, but in the existing market, where oil grades of sweet crude have been compressed and pressured, there’s not much of a difference between the price of light sweet crude and the price in Asia or Europe.”

Oil prices would have to almost double for the ban’s departure to be felt by consumers, which is unlikely in the near future. But when they do, oil companies that pushed for the change will be ready to reap the benefits.

The American Petroleum Industry, an industry lobbying group, estimates by 2020 that 18 states will gain more than 5,000 jobs apiece because of U.S. crude exports. Louisiana would add more than 7,000 positions, the group estimates.

Some observers, including Upton, are skeptical.

“For all intent and purposes, it hasn’t really been that big of a factor in the domestic oil and gas market,” he said of the ban. “Once you had the big shale boom that’s occurred over the last decade, you had unprecedented increases in oil production in the U.S. That’s why we’ve been talking about the export ban over the last few years when it largely wasn’t discussed for 30 years before that.”

Despite some claims that removing the ban will increase U.S. energy production, Upton isn’t so sure since prices are so low.

Eric Smith, associate director of the Tulane Energy Institute, a university think tank on the energy industry, said lifting the ban makes good sense politically and strategically.

The U.S. already exports more than 350,000 barrels of crude per day to Canada, one of a handful of destinations that are exempted under the ban.

Still, he anticipates that new jobs attributed to new export infrastructure needs, such as building barges or tankers or new oil storage facilities — like three that Canadian company Enbridge Inc. plans to build in the Gulf of Mexico at an estimated $5 billion price tag — could provide an economic windfall to the state.

At this point, it’s still unclear.

“Nobody’s seen the regulations yet associated with removing the ban,” he said.

Follow Richard Thompson on Twitter, @rthompsonMSY.