However, the American Petroleum Institute CEO Mike Sommers told CNN that the powerful oil and gas trading group is “absolutely” taking the risks of an export ban seriously, including relying on Moderate Democrats to tell White House officials.
“We’re mobilizing all of our forces. We’re doing everything we can,” Sommers said in an interview from his office in Washington.
Sommers warned that the export ban would not only affect American drivers by raising prices at the pump, but also help foreign manufacturers increase their sales and market share.
“It would be a gift to OPEC and Putin,” the API CEO said, referring to Russian President Vladimir Putin.
‘World-wide oil shock’
“A ban on U.S. crude oil exports will boost domestic supply and put downward pressure on prices on American homes,” the lawmakers wrote in a letter to Biden.
Sommers took the opposite view, arguing that the export ban would cause gasoline prices to go higher, not lower. He shows how oil is a globally traded commodity and how the world market depends on 3 million barrels per day of US exports.
“This is going to lead to a worldwide oil shock,” said Sommers.
Pressure from the White House to ban oil exports has eased as oil prices plunge.
After hitting $85/barrel in mid-November, US oil prices recently fell below $65/bbl. The sell-off began in anticipation of the coordinated release of strategic reserves by the United States, China and other countries. Prices fell further due to concerns that the Omicron variant would reduce energy demand.
Why the export ban doesn’t make sense
But Big Oil is not alone in making this case.
Many industry experts have told CNN that while banning US oil exports will lower the price of US oil (marketed as West Texas Intermediate), it will also increase the price of Brent crude, the benchmark benchmark. Global. And that’s a problem because gasoline is priced in Brent, not WTI.
The price of Brent is likely to move higher, perhaps as strongly, as the world oil market will lose access to a supply of about 3 million barrels (barrels are normally shipped from the US abroad).
The biggest problem is that the United States is not an island unto itself. Decade-old refineries along the Gulf Coast cannot rely solely on U.S. shale oil, which tends to be lighter than oil abroad. To produce gasoline, diesel and jet fuel, these refineries typically blend shale with heavy barrels imported from Canada, Mexico, the Middle East and elsewhere.
“I think the administration is getting smart with this,” Sommers said.
‘Short-term bright spot’
However, the API boss said the trade team is still working with Democrats in Congress to tell the White House that this is a “really, really bad idea.”
And Sommers points to the implications for national security, including the potential for a military conflict between Russia and Ukraine.
“This is the opposite time when we should withdraw from the world,” he said.
When asked about the impact of Biden’s decision to tap the Strategic Petroleum Reserve, Sommers described the release as a “drop in the bucket” and downplayed the long-term impact.
“There is an old saying that the success of a rain dance depends on timing,” says Sommers, pointing to the impact of the Omicron variation.
The Biden administration’s release of 50 million barrels is the largest release in US history.
While the oil market could see a “short-term blip” from the release of the SPR, Sommers argued that recovering demand and supply constraints suggest “we will continue to see expensive.”
Shocking indoor heating stickers
“This corporate greed is inexcusable, and represents the result of a fraudulent system that enriches energy company executives and investors, and makes American families have trouble paying the bills.”
Sommers, whose group represents Cheniere and other liquefied natural gas (LNG) exporters, said he was “concerned” about the risk of a ban on natural gas exports.
He pointed out how US allies in Europe and Asia that have long-term contracts to buy US LNG and ban exports will force them to turn to China and Russia for energy supplies.
“A really good way to damage our standing in the world is to breach those contracts at a time when energy costs are high,” Sommers said.
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