Relax Restrictions on Crude Exports, Says Exxon, Conoco? Just Say No!
NEW YORK (TheStreet) -- If there was ever a case to keep the U.S. ban on oil exports alive, we've seen it in the last six months. We are producing more oil and using less of it, yet the price of gasoline is currently an average of $3.50.
Recently big oil companies have been lobbying government to lift export bans on all crude oil. Since January of this year, we have broken our own records for reserves several times. One might think that would be a strong case for the lifting of such a ban.
Oh, on the contrary, my friends.
We've seen nothing but higher prices built upon fear of other countries' geopolitical problems. Despite the fact that we still have huge reserves -- and gasoline reserves continue to build -- prices have done nothing but increase.
Herold Hamm, CEO of Continental Resources
An end to the ban would would lead to untold profits. Almost all of these companies are seeing record profits already, but it's not enough for them. They want the ability to sell to the global market and to the highest bidder. They argue that this would lead to more production and more jobs. I would argue that it would lead to a more volatile market that is susceptible to all global turmoil on perceived supply and demand.
There would be no spread on WTI vs. Brent crude oil, which would move together at every skirmish that pops up.
And there are lots of those skirmishes. You know all the headlines. Iraq, Ukraine, Libya and even Iran have all put fear into the markets. The irony is that of all of those countries, we've actually got an increase in oil from Iraq, Libya and Iran, due to loosening sanctions.
U.S. production is very near all-time highs. Gasoline stockpiles continue to climb, as U.S. consumption continues to decline year over year. Iraq actually increased its output despite the northern occupation of ISIS. Libya, which was not expected to produce anything, is getting out about 3.4 million barrels a day. Iran, which largely disregarded earlier sanctions, is ratcheting up its production every month. The conflict between Ukraine and Russia hasn't slowed down one barrel of oil. In fact, Barack Obama has repeated that any future sanctions against Russia will avoid disruption of the oil markets.
People will argue that West Texas Intermediate crude oil inventories actually declined for the second straight week.
This is true. But why?