Crude export ban will stand.
Article from Hellenic Shipping:
Prediction: Crude export ban will standin Freight News 22/09/2014
 It will take a “train wreck” of falling prices, declining oil production and idle drilling rigs before the United States lifts its longstanding ban on exporting crude, a noted economist predicts.
Analysts have warned those are possible outcomes if existing discounts on U.S. crude grow even larger and domestic oil production exceeds the ability of the nation’s refiners to process it.
While oil producers are beseeching the Obama administration and lawmakers to ease the export ban now — heading off any such “day of reckoning” — Rice University economist Kenneth Medlock said this week that political action probably will lag behind the oilfield impacts.
“I don’t see any movement or legislative action to lift the ban probably until the next administration is in office,” he said during a panel discussion in the nation’s capital. “And the problem with that is that is when the train wrecks.”
West Texas Intermediate oil, the U.S. benchmark, is now trading about $4.50 less than its international counterpart, Brent crude. But the discounts are deeper in other parts of the country; for instance, in Midland, Texas, home to the prolific Permian Basin, oil was valued roughly $21 less than WTI crude in Cushing, Oklahoma, during August.
During a panel discussion at the Washington, D.C., offices of law firm Baker Botts, Medlock said without changes in U.S. export policy, the price disconnects between light, sweet U.S. crude oil and Brent could hit $30.
“We are on a path … of continued, dramatic increases in oil production,” said Medlock, who heads the Center for Energy Studies at Rice University’s Baker Institute for Public Policy. But “if you start to see those discounts matriculate across all producing assets in North America, (that will) discourage activity in the field. That’s where you start to see the train derail.”
Faced with dropping U.S. prices for their crude, Medlock said, international oil companies could take their drilling rigs and dollars to other countries, including Mexico, where energy reforms are opening up new opportunities. “What you are likely to see if those disconnects become very real and very biting is a lot of capital moving into Mexico — a lot more than otherwise would,” he said.
Medlock is not alone in predicting a kind of tipping point when falling U.S. oil prices make some drilling uneconomical.
The research firm IHS warned about current trade policy threatening domestic oil development in a report in May. Frank Verrastro, a senior vice president of the Center for Strategic and International Studies, has said “a day of reckoning” is coming. And Kevin Book, who leads the research practice at ClearView Energy Partners, describes a point of saturation, but has cautioned it is difficult to say when it hits and how long it will take before drill bits stop turning.
Source: Houston Chronicle |
