White House Threatens Veto of Crude Export Bill

David Fessler By David Fessler, Energy and Infrastructure Strategist, The Oxford Club

Oil & Gas

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.

This is a very timely, controversial issue. I’d like to hear your thoughts on it, positive or negative. Leave a comment using the link below.

Good investing,

Dave

  • guest

    Of course Obama wants to veto this. Of course he blocked the Keystone Pipeline. Of course he wants a “carbon tax.” Of course he wants stricter regulations on coal, oil, fracking, offshore, onshore, etc. Of course he is against nuclear power.

    Obama’s goal is to make America as weak as possible. Once you understand this, all his initiatives make sense. Energy is just one area. He’s aiming for a weak culture, a weak economy, a weaker military, a more ignorant electorate, and all power concentrated in Washington, which will be run by socialist/progressives for the next 100 years – at least – if the mass immigration invasion continues.

    We now have a full 25% of the Mexican population living in the US. We take in more LEGAL immigrants EVERY YEAR than the rest of the world combined. This means lower wages, more entitlement programs, more taxes, etc, etc. Amnesty for all – except for American taxpayers. To the other 47%, go back to sleep. Daddy will take care of you.

  • Jim Fox

    This is a ” no Brainer”. Why should the US sit on the sidelines with all of the capacity we have to
    drill and refine, while Iran and others export their oil for great profit? On this issue, I think the President is wrong. Let’s lift this 40 year old ban and face the reality that oil is a worldwide commodity, and compete as Americans are so good at competing.

  • Ken Duncan

    It is ironic that Obama agrees to lift the ban non oil exports for Iran but opposes lifting the ban for the oil industry in his own country.

  • Bill

    Of course it should be passed and implemented into law. But when Obummer vetoes the bill it will be because, as a Muslim, he is doing all he can to weaken America. That’s why he’s allowing unregistered, unchecked Muslim immigration from Syria and elsewhere. The goal, being implemented now, is to plant 150 “seedling” groups of 2000-3000 Muslims around the US. As these populations grow they will demand their “rights”, including Sharia law. Check out the rest of the ugly details at fortressoffaith.org. Look under “Daily Programs” and go back to the beginning of Sept.

  • Joan Puryear

    First and foremost, If we allow IRAN to export crude, certainly the U.S. has the right to do the same!
    National Security issue: energy security.
    More high paying jobs would be created.
    Keep the price of gasoline low. Would be beneficial to refiners.
    All a win, win.

  • Bob Charsha

    Your one sentence sums everything up perfectly ” it’s an ABSOLUTELY no brainier for the White House and the administration” there are no brains between the both of them!!

  • JK

    considering that you mentioned the Permian Basin, how would this effect LPI Laredo Petroleum

  • JLE

    Your arguement ignores the fact that the Saudis and OPEC are keeping production high, in spite of a world-wide oil glut in order to put Russian and US frackers competitors out of business. The primary oil problem for the US is that we are still net importers of oil. Are we really short of refining facilities?
    Does the ban apply to off-shore refineries owned by American companies?
    Dropping the ban would not help with our primary problem, oil imports. It might make it worse. Dropping the ban would be tantamount to a declaration of economic warfare with OPEC, and they can get oil out of the ground at about 1/2 the price of US producers. I don’t believe dropping the ban is a money making proposition for anyone at this point. The US economy is in good shape relative to everyone else, oil demand is increasing, and OPEC’s cheap oil reserves are dwindling. I think it would make far more sense to keep the ban for another year or so when the US is more or less energy independent, and demand is driving the price of oil up.

  • Ken Duncan

    USEIA reports that gross 2014 crude imports by the US totaled 9.24 barrels, 37% of which came from OPEC countries and only 13% of which came from Saudi Arabia. It appears to me that the Saudis and OPEC declared war already. We have a lot of leverage to deal with the Saudis, in the form of plentiful domestic crude oil production capacity and also the five ships of ours that patrol the Gulf of Hermuz protecting Saudi oil shipments. Our leaders, though, seem either too timid or don’t know how to leverage our assets and strengths. I don’t see a downside to repeal of the oil export ban. Open up the world market place and give the oil cartel something more to think about. Production will ebb and flow based on prices.

  • Terrell E Arnold

    Significant exports of US crude should cause the cartel to re-examine its recent overproduction strategy. I would be concerned that the US industry and policymakers keep a weather eye on long term US demand/supply projections. Exporting now on a scale that forces imports later does not look terribly smart.

  • Paul Fernandez

    I think it’s time people open their eyes. All the bunny and tree huggers need their gas meters shut off and banned from gas stations. Maybe then they will open their eyes and see how valuable us oil and gas workers are to this country. If you would rather buy oil from the Saudi’s, go live there and support them. All we are trying to do is keep the economy strong, keep gas in your car and keep your butt warm at night. If you were to take the time and check into drilling, fracking, gas compression, etc.etc., you may open your eyes and see how independent we can be. We don’t need the imports of oil, costing us money and losing jobs, costing us more money. I believe in the American dream, why wont you let us? on a closing note, THANKS OBAMA!!!

  • Cheryl Kleist

    Obama will veto. He considers oil dirty energy, and he doesn’t want to pass such a bill that would
    go against his stance to reduce carbon foot print. His ideals and goals have never matched reality
    or putting Americans back to work or improving the economy. Those things are unimportant to him.

    • paglee

      Why should the Senate rush this bill so it can be vetoed by a short-timer long-environut when he’ll be gone in a couple of weeks?