On Friday, the House of Representatives voted in favor of lifting the 40-year U.S. crude oil export ban. However, the move was opposed by the White House, which had threatened to use veto against the cancellation of the ban. The bill passed the House 261–159 but failed to reach the 290 votes level, which is required to overrule presidential veto.
The White House has already made its stance on the matter very clear. The Obama administration strongly opposes the removal of crude export restrictions that, according to it, is not the need of the hour. The administration believes that Congress should focus more on clean energy than proving billions of dollars in subsidies to oil companies.
The bill to ban crude oil exports was passed in 1975 to tackle the effects of the Arab oil embargo. The aim then was to retain domestic production in order to protect the economy from commodity price escalation. However, a lot has changed since then. The debate on lifting the ban intensified of late as the weak crude pricing environment has taken a toll on several U.S. shale explorers.
Support versus Opposition
Upstream players have much to gain if the ban is lifted. These firms would acquire a bigger market to sell their produce if they are allowed to start exporting crude. Also, this is likely to improve West Texas Intermediate (WTI) prices to the Brent crude levels. An increase in commodity price and a bigger market share should drive growth for these companies.
Devon Energy Corporation DVN, along with other big names like Hess Corporation HES, ConocoPhillips COP and Encana Corporation ECA, has been pressing the issue for over a year.
George Baker, executive director of a coalition of oil companies that includes names like Marathon Oil Corporation MRO and Apache Corp. APA, believes that lifting the export ban will place U.S. companies in a better position to compete with other global players.
However, the other end of the oil and gas sector – refiners and marketers of petroleum products – is expected to support the Obama administration’s decision. This is simply because export will hamper their margins as they benefit from the Brent-WTI crack; the wider the better.
Apart from this section of the oil and gas industry, the biggest supporters of the Obama administration are the environmentalists. Allowing export is likely to further drive the drilling boom (more exploitation of natural resources), which will be detrimental to the environment.
Oil and Gas Industry Remains Muted
While the crude export ban remains a much debated issue, the passage of this bill failed to garner any significant response from the energy market. The lack of response can be attributed to uncertainty over the bill as possibility of President Barack Obama’s veto looms large.
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