The CEO of a major oil company said that the ban on U.S. oil exports would be a “gift to OPEC and Putin.”

Read Time:4 Minute, 42 Second

But American Petroleum Institute CEO Mike Somers told CNN that this powerful oil and gas trading group “absolutely” takes the risks of export bans seriously, including relying on moderate Democrats to persuade White House officials to give up the idea. .

“We are gathering all our forces. We are doing everything we can,” Somers said in an interview in the Washington office.

Summers warned that the export ban would not only have counterproductive consequences for US drivers by raising gasoline prices, but would also help foreign producers by increasing revenue and market share.

“This will be a gift to OPEC and Putin,” the API chief said, referring to Russian President Vladimir Putin.

‘Global oil shock’

Last month, nearly a dozen Democrats in Congress urged Biden to solve the problem of high oil prices by exploring export bans.

The lawmaker wrote in a letter to Biden: “A ban on U.S. crude oil exports will increase domestic supply and put downward pressure on prices for American households.”

Summers put forward the completely opposite view, believing that the export ban will cause gasoline prices to rise, not to fall. He pointed out that oil is a globally traded commodity, and the world market depends on 3 million barrels of US exports per day.

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“This will cause an oil shock worldwide,” Summers said.

Due to the plunge in oil prices, the White House’s pressure to ban oil exports has eased.

After hitting US$85 per barrel in mid-November, US oil prices have recently fallen below US$65 per barrel. The sell-off started with the expectation that the United States, China, and other countries would coordinate the release of strategic reserves. Fearing that the Omicron variant would weaken energy demand, prices fell further.

According to data from the American Automobile Association, gasoline prices have also fallen, with the national average price falling to $3.37 per gallon on Friday. This is down from $3.40 a week ago.

Why the export ban does not make sense

Of course, API is hardly an independent voice of oil exports.Protecting oil exports is very much in the economic interest of the trading group, which helps the income of API members, including Exxon Mobil (XOM) with Chevron (CVX).

But the big oil companies are not alone in raising this situation.

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Many industry experts told CNN that although the ban on US oil exports would depress US oil prices (known in the market as West Texas Intermediate), it would also increase the price of the global benchmark Brent crude oil. This is a problem because gasoline is priced based on Brent crude oil, not WTI.

The price of Brent crude oil may rise, and may rise sharply, because the world oil market will not be able to obtain a supply of about 3 million barrels (usually barrels shipped from the United States to overseas).

The biggest problem is that the United States is not an island. Oil refineries on the Gulf Coast with decades of history cannot rely solely on American shale oil, because American shale oil is often lighter than overseas oil. To produce gasoline, diesel, and jet fuel, these refineries usually mix shale with heavy barrels imported from Canada, Mexico, the Middle East, and other places.

“I think the government has become wise about this,” Somers said.

‘Short-term short-lived’

However, the API boss said that the trade organization is still working with Democrats in Congress, telling the White House this is a “very, very bad idea.”

Summers pointed out the impact on national security, including the risk of a military conflict between Russia and Ukraine.

“This is the opposite time we should quit the world,” he said.

When asked about the impact of Biden’s decision to use the strategic oil reserve, Summers described the release as “a drop in the bucket” and downplayed the long-term impact.

“There is an old saying that Yuwu’s success depends on timing,” Sommers said, noting the impact of the Omicron variant.

The 50 million barrels released by the Biden administration is the largest in American history.

Although the oil market may experience a “short-term flash in the pan” due to the release of the SPR, Sommers believes that the rebound in demand and supply constraints indicate that “we will continue to see high oil prices.”

Home heating sticker vibration

Americans are also struggling to cope with higher home heating costs, partly because of soaring natural gas prices.
According to data from the U.S. Energy Information Administration, American households that mainly use natural gas for heating spend on average 30% more than last winter.
This prompted some lawmakers to urge the White House to take action. Senator Elizabeth Warren wrote to natural gas producers last month, urging them to send record amounts of natural gas overseas when domestic prices remain high.
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“This corporate greed is unforgivable,” Warren wrote. “It represents the result of a manipulation system that benefits energy company executives and investors and makes it difficult for American households to pay their bills.”

Sommers, who represents Chenier and other liquefied natural gas (LNG) exporters, said he was “concerned” about the risks of the natural gas export ban.

He pointed out how U.S. allies in Europe and Asia have long-term contracts to purchase U.S. LNG, and export bans will force them to turn to China and Russia for energy.

“A really good way to undermine our position in the world is to breach these contracts when energy costs are high,” Sommers said.

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