As the number of U.S. drilling rigs plummets by a third and thousands in the industry face layoffs, oil companies are focusing on an effort to convince Congress to lift the longstanding ban on oil exports.
“We shouldn’t put domestic producers at a competitive disadvantage by limiting the available markets,” Ryan Lance, CEO of Texas-based ConocoPhillips, told the U.S. Chamber of Commerce on Tuesday.
Scott Sheffield, CEO of Pioneer Natural Resources, also based in Texas, was making the same push Tuesday in front of the House Subcommittee on Energy and Power, arguing the industry’s struggles with low oil prices are worsened because companies aren’t allowed to ship American crude oil to foreign nations.
Oil prices across the globe have plummeted because of a supply glut driven by surging American production, which has in turn led to companies slashing costs and laying off workers. The Federal Reserve Bank of Dallas predicts 140,000 jobs in Texas alone could be lost by next year as the reverberations of the oil slowdown ripple throughout other parts of the state economy.
Energy companies worldwide are hurting. But the international market price, known as Brent, is $10 a barrel higher than the benchmark price for U.S. crude sales, West Texas Intermediate.
“If current trends continue and the export ban is not lifted, U.S. shale oil production will flatten or decline by disproportionate volumes versus our overseas competitors, diminishing the profound benefits of the shale revolution,” Sheffield said in prepared testimony.
Arguing against lifting the ban, though, was Delta Airlines, which told the House energy subcommittee that allowing exports would hurt consumers by threatening to raise prices for gasoline and other fuels.
“Why would any policymaker want to risk jeopardizing the current consumer benefits we are experiencing and institute a policy that would benefit only a narrow sector of the economy?” asked Graeme Burnett, board chairman of Monroe Energy, Delta’s refining subsidiary.
The oil export ban was put in place in the wake of the 1970s Arab oil embargo, ostensibly to protect Americans from gasoline shortages and price spikes. But oil companies and energy economists argue it’s outdated in an era of enormous U.S. oil and natural gas production.
American Gulf Coast refineries are more configured to handle heavier grades of crude oil than the lighter-grade oil that’s surging into the market from the top shale production areas in North Dakota and Texas. That’s lowering the price for the oil, said ConocoPhillips CEO Lance.
“That discount starts hurting domestic producers and it cuts our ability to reinvest back in our business to grow production,” he said.
It’s a sensitive issue, and Lance acknowledged that Congress and the White House are not ready to lift the oil export ban. He said it’s important for the industry to push hard on it now, though.
“We’ve got to gain some traction this year. Certainly as we go into an election year (in 2016) it becomes harder,” he said.
ConocoPhillips spent $1.4 million in lobbying Congress the final three months of last year alone on crude exports and other issues, according to disclosures.
Supporters of ending the export ban argue it wouldn’t raise gasoline prices and could even lower them.
Gas prices are tied to the global oil price, and more U.S. oil on the international market would drive down the global price, according to an analysis by the global consulting firm IHS Energy.
“It is not the case that hoarding energy supplies inside our borders helps lower prices to consumers,” said Amy Myers Jaffe, an energy economist at the University of California, Davis.
The AFL-CIO agrees that gasoline prices likely would not be affected but opposes lifting the export ban nevertheless.
Brad Markell, executive director of the AFL-CIO Industrial Union Council, told the House energy subcommittee that sending the oil abroad would hurt American refiners.
“If we lift the ban on crude oil exports, we will export both our oil and the jobs and economic activity associated with refining that oil,” he said.
But the American Fuel and Petrochemical Manufacturers, the trade association for refiners, isn’t against lifting the ban, saying, “The free market should drive all energy policy.”