Already, Vice President Joe Biden has begun the most significant intervention into the energy markets in a decade. Big Oil is concerned that he isn’t nearly finished yet.
Democrats have been urging Biden to go even further than simply releasing strategic oil reserves by prohibiting US oil businesses from exporting their products overseas for several weeks. The vice president, despite the pressure from members of his own party, has so far refrained from adopting the more extreme step of prohibiting oil exports. A spokesman for the White House declined to make any additional comments.
However, American Petroleum Institute CEO Mike Sommers told CNN that the strong oil-and-gas trade group is “definitely” concerned about the possibility of an export restriction and is working with moderate Democrats to persuade White House officials to reconsider their position.
“We’re putting together all of our resources. We’re putting in every effort possible “In an interview in his Washington office, Sommers explained his position.
Sommers warned that an export prohibition would not only have a negative impact on US drivers by increasing gas costs, but it would also benefit foreign producers by increasing their revenue and market share as well.
“It would be a present to the Organization of the Petroleum Exporting Countries (OPEC) and Putin,” the API CEO remarked in reference to Russian President Vladimir Putin.
Last month, almost a dozen Democratic members of Congress requested Vice President Biden to investigate the possibility of imposing an export embargo to combat high gas prices.
They wrote to Vice President Joe Biden, saying that a ban on crude oil exports from the United States would increase domestic supplies and put downward pressure on prices for American people.”
Sommers presented the exact opposite argument, claiming that a prohibition on exports would lead gasoline prices to rise rather than fall. He emphasised that oil is an internationally traded commodity, and that the entire market is reliant on US exports of 3 million barrels per day to meet demand.
The result, according to Sommers, would be a “oil shock” throughout the planet.
Because oil prices have plummeted, there has been less pressure on the White House to impose a limit on oil exports.
Following a brief flirtation with $85 a barrel in mid-November, US oil prices have recently fallen below $65 a barrel on a weekly basis. It was anticipated that the United States, China, and other countries would unleash their strategic reserves in a coordinated fashion. Prices dropped even lower as a result of concerns that the Omicron model will reduce energy demand.
According to AAA, gas prices have also decreased, with the national average decreasing to $3.37 a gallon on Friday from $3.39 on Thursday. This is a decrease from $3.40 a week ago.
Of course, the API is far from being an independent voice on the subject of oil exports. It is in the financial interests of the American Petroleum Institute (API) to protect oil exports, which provide money for API members such as ExxonMobil (XOM) and Chevron (CVX) (CVX).
However, Big Oil is not alone in arguing for this position.
Industry analysts have informed CNN that while prohibiting US oil exports would lower US oil prices (also known as West Texas Intermediate) it would concurrently raise the price of Brent crude, which is considered the world’s reference commodity. And that’s a problem since gasoline is priced based on Brent, not West Texas Intermediate.
Brent prices would very certainly rise, maybe significantly, as the international oil market would lose access to almost 3 million barrels of supplies (barrels normally shipped from the US overseas).
The fact that the United States is not an island unto itself is the most serious concern. The refineries around the Gulf Coast, which have been in operation for decades, cannot rely only on US shale oil, which tends to be lighter than oil from other parts of the world. These refineries primarily blend shale gas with heavy barrels imported from Canada, Mexico, the Middle East, and other countries in order to produce gasoline, diesel, and jet fuel for sale. Sommers believes that the administration is becoming more aware of the situation.
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