White House Threatens Veto of Crude Export Bill
This past Friday was a historic day in Washington. The House passed HR 702, a bill lifting the ban on U.S. crude oil exports.
The vote had bipartisan support. Many government agencies – including the Congressional Budget Office, the Energy Information Administration and the Government Accountability Office – have found that allowing crude oil exports would mean lower gas prices.
More than 12 independent studies have found that lifting the ban would create more jobs. They also found that removing the ban would provide national security benefits and raise the U.S. GDP.
And investors stand to benefit, too.
More crude exports would mean exploration and production (E&P) companies wouldn’t have to worry about cutbacks.
Because American crude is the light, sweet variety, it’s easier and cheaper to refine. Refiners around the world would all be eager buyers of our crude.
Without export limitations, West Texas Intermediate prices (the benchmark for American crude) would gradually increase and eventually surpass the prices of heavier, harder-to-refine Brent crude.
Many of those in support of lifting the ban argue that if we allow Iran to export crude then we certainly should allow U.S. suppliers to do the same. That’s a good idea.
The oil industry said the bill would help producers in the U.S. compete against Russia, Saudi Arabia and Iran.
American Petroleum Institute President Jack Gerard issued a statement: “Today’s vote starts us down the path to a new era of energy security.
American producers would be able to compete on a level playing field with countries like Iran and Russia, providing security to our allies and accelerating the energy revolution that has revitalized our economy.”
Twenty-six Democrats joined with 235 Republicans in a vote of 261 to 159 to lift the 40-year-old ban. So why did so many Democrats side with Republicans on this issue?
That’s a simple one. Many states depend on the oil industry for jobs.
Voting against the bill wouldn’t be popular in those states.
So what happens next?
The bill will now move to the Senate. Once there, its passage likely won’t be smooth.
The White House has already said Obama will veto the bill.
Obama is between a rock and a hard place. In countless policy speeches during his two terms, he has taken credit for America’s newfound energy wealth.
Now it seems he can’t let go of an outdated ban put in place 40 years ago. America’s growing glut of oil isn’t getting any smaller because the refineries here aren’t set up to process it.
Lifting the ban would allow oil to be shipped to refineries set up to handle light, sweet crude. It could send the price of American crude surging.
E&P companies would take advantage of rising prices, producing more and hiring workers back.
The entire industry would be able to compete fairly in the global markets instead of being at the mercy of Saudi Arabia. This is an absolute no-brainer for the White House and the Obama administration.
If the bill passes, look at big independent E&P companies with a large exposure to oil production. Oil pipeline MLPs should be on your radar as well.
If Obama vetoes the bill, don’t give up on U.S. crude suppliers. A few E&P companies can make money in today’s environment.
Focus on those with very low production costs. Those are primarily found in the Permian and Bakken oil fields.
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