The battle by some oil companies in the US to persuade congress to lift the oil export ban that has been in place since the 1970’s oil embargo has hit a bit of a snag: gasoline prices have started to fall.
Fracking has created a boom in domestic oil production in Texas and North Dakota, which has caused a glut in oil supply at refineries, lowering the price of oil, and therefore also the price of gasoline, which is down 10 percent since March 2013.
Gasoline prices have historically been tied closer to global Brent crude prices, but the production boom in the US means that US oil supplies a higher contribution to the gasoline market, at nearly 53% today compared to 34% less than three years ago.
The fact that gasoline prices are falling will make it much harder for the likes of Exxon Mobil and ConocoPhillips to convince US legislators that ending the export ban will be good for the nation and its people.
Related article: Lifting the Oil Export Ban: Where the Refiners Stand
Sandy Fielden, the director of energy analytics at RBN Energy LLC, said that if oil exports are increased then “the most obvious thing that’s going to happen is that crude prices will go up and so will gasoline.”
The US gasoline prices have reached a three-year low and are expected to continue to fall until 2015. Barclays estimates that lifting the export ban will increase the amount that motorists pay for fuel by as much as $10 billion a year.
Bloomberg claims that the debate is splitting the energy sector. Oil producing companies want to be allowed to send their crude abroad where it can be sold at a much higher price, but the refining companies want the crude to remain in the US so that they can continue to benefit from the low price.
Senator Lisa Murkowski is a strong advocate of lifting the export ban and claims that allowing exports will help to lower the trade deficit and boost employment, but this is unlikely to persuade the people, who are benefitting from the current low gasoline prices.
Kenneth Cohen, the vice president of public and government affairs at Exxon Mobil, said that “the reality is the market has moved from an era of scarcity to an era of abundance -- but we’re still saddled with statutes and regulations stuck in a mindset of scarcity.”
By. Joao Peixe of Oilprice.com
Joao is a writer for Oilprice.com