Ryan Lance, ConocoPhillips CEO and Chairman has told policymakers that the US’ approaching surplus production of crude oil offers an opportunity for the expansion of global trade via exports. The US could sustain the job creation and economic growth powered by the US energy renaissance, while putting downward pressure on consumer fuel prices and improving global energy security at the same time.
Lance highlighted that although a ready market exists for such exports, the federal government must first remove the ban written into the 1975 Energy Policy and Conservation Act, which was enacted during a time of energy shortages and gasoline lines. The act prohibited crude oil exports. Currently only a few exceptions are allowed, including small amounts of oil sent to Canada and oil exported from Alaska.
Lance said, “the US energy situation has improved significantly since the ban was put in place. Government should recognise the new reality of the renaissance that has transformed North America from energy scarcity to abundance, and enable the industry to keep it going. We have just scratched the surface of its potential, and can help ensure that the renaissance continues as an engine of long term economic growth by exporting our excess crude into the world market. Thanks to our new energy abundance, domestic refiners would still have all the oil they need, and would still enjoy a competitive advantage over foreign refiners.”
What’s happening to refining?
It was also said by Lance that the nation’s growing production of light oil from shale rock is a mismatch with many Gulf Coast refineries that years ago were configured to process heavy oil. As a result, US light oil production already exceeds domestic refining capacity on a seasonal basis, and will do so year round by 2017. By 2020 exports of 1.5 million – 2 million bpd would be needed in order to avoid needlessly hindering industry development activity, with resulting harm to the national economy. Increasing domestic capacity to refine this light oil would require massive investment on the part of refiners, as well as securing of air permits for new construction. Further, it would be less efficient and less economically beneficial to the US than exporting excess high value light oil while continuing imports of lower value heavy oil from such reliable sources as Canada.
In addition, Lance pointed out that the lack of sufficient refining capacity to process light oil economically forces US light oil to sell at a discount to world oil prices. This discount, particularly during a time of oil price weakness, threatens to force many of the nation’s new producing wells below the breakeven point and reduce the industry’s cash flow, in turn leading to major reductions in new domestic drilling and development.
Lance said, “multiple studies confirm the economic benefits of oil exports. These include increased US production, a higher gross domestic product and average household income, improved balance of trade, creation of 1 million new jobs at the peak, lower consumer fuel costs, and greater revenue generation for government. We urge the federal government to recognise these realities. The Administration and Congress should act immediately.”
Edited from press release by Claira Lloyd