“We can’t export. We can’t access the world market.”
That’s Harold Hamm, CEO of Continental Resources, speaking during a recent CNBC interview about falling oil prices and the federal restrictions on exporting crude oil. Basically, domestic oil producers are held by regulation as a captive audience for the refiners. Because unrefined oil cannot be exported, domestic oil producers really have nowhere else to sell their oil but to domestic refiners.
Obviously, with prices tanking, it would be beneficial if American oil companies had access to the global markets for crude oil.
But Hamm made another interesting point. The Obama administration is working with Iran for a diplomatic agreement that would remove export restrictions on that country.
“Here we are thinking about lifting the sanctions on Iran and letting them export, and yet here we have sanctions in America that we can’t export our oil,” Hamm said. “What’s going on?”
“We build pipelines to Canada to allow them to export, yet we can’t here in America. There’s something wrong with this policy, bad wrong,” he continued.
No kidding. Meanwhile, Hamm predicted that production from America’s three primary oil plays would be down to about 700,000 barrels per day within a year. To put that into perspective, North Dakota is currently producing over 1.1 million barrels per day. So he’s talking about a pretty long fall.
Of course, that could be a scare tactic aimed at supporting a policy change to allow exports, but even if it is it seems to me the case for exports is clear.
Why would we want to clear the way for a country like Iran to export while forcing our companies to operate under export restrictions?
The argument against is that by restricting exports we keep fuel prices low, but I’m not sure that’s actually the truth. Ending the export ban would enlarge the market for American crude oil, which obviously helps domestic oil prices. But, it would also expand the supply of oil on the international market, which would have a downward impact on fuel prices, which is something at least one federal agency has concluded as well.
The oil and gasoline markets are enormous and hugely complex, so I don’t think it’s fair to say that changing any one variable is going to have a direct and predictable impact on another, but generally speaking I think allowing American oil exports would be a wash for domestic fuel prices, at worse.