Friday, July 24, 2015

Why can't Texas export oil when Iran can?

By Chris Tomlinson of Houston Chronicle. Excerpts:
"U.S. oil companies are forced to sell their product at a substantial discount"

"Congress needs to repeal this misguided federal ban so that U.S. crude can become another source in the international marketplace and diminish the power of OPEC"

"When a nation that many lawmakers consider an enemy can sell crude more easily than Texas, there is something wrong in Washington."

"First, many Democrats believe that allowing oil exports will increase the price of U.S. gasoline. While that may sound logical because exports will likely raise the price of American crude while lowering the price of foreign crude, the truth is that U.S. refineries have never given Americans a discount.

"The global oil price is what sets the price of gasoline,""

""U.S. refiners already produce above and beyond what U.S. consumers need or demand. ... We already export our crude, we just do it through the refined product market."

In fact, several studies show that adding U.S. supply to the market will bring down international prices, and therefore bring down U.S. gasoline prices.

The second myth is that we can keep U.S. oil within our borders and stop importing oil from elsewhere and achieve energy independence. This survivalist view is strong in the more paranoid corners of the Republican Party. It's also out of touch with reality.

Advocates of energy independence point to the OPEC oil embargo in 1973 as proof of America's vulnerability. But since then, the market has become much more fractured and sophisticated. Arab members of OPEC once controlled the majority of the world supply, but now they manage only about 25 percent. The U.S. also doesn't buy that much from them anymore.

If Arab countries decided not to export to the U.S., it would drive the price up a little bit, but there are plenty of other sources that would keep us supplied. That is called energy security,"

"There are also thousands of grades of oil and petroleum products. We need some types of foreign heavy oil, and we have too much light, sweet crude."

"U.S. refineries can take only so much U.S. oil because they are configured for heavier foreign oil. That means U.S. oil is going into storage while refiners import heavier grades to keep operating."

"low prices are killing U.S. drilling."

"shale drillers cannot generate profits at current prices and U.S. production will soon drop.

If we want to keep the industry alive, we need to let it sell to the international market and generate higher revenues.

Markets are complex, and trying to manipulate them is foolish."


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