Baku, Azerbaijan, Jan. 27
By Aygun Badalova - Trend:
US lifting an oil export ban is not about increasing net oil supply to the world market, but to more efficiently use refining capacity, Peter Hartley, professor of economics at US-based Rice University believes.
The US has abolished the 40-year restriction on oil exports. The first shipments of US crude oil arrived in Europe last week. In late December, the US company Enterprise Products Partners announced an export contract for its oil, becoming the first oil exporter from the US in four decades. The buyer was international trader Vitol Group that intends to send the crude to its refinery in Switzerland.
"The key point that people miss when discussing the lifting of the oil export ban is that not all oil is the same. Refineries are tuned to different grades of oil," Hartley told Trend.
In particular, he said, there is a mismatch between the Gulf Coast refineries that were constructed to refine heavy sour crude from Venezuela and Mexico and the light sweet oil that is being produced from the shale deposits.
Lifting of the ban is all about allowing the new US oil to be exported to where it can be refined most readily, and importing more other oil that can be refined most readily in the existing US refineries, according to Hartley.
"It is not at all about increasing US net oil supply to the world market. It is about using the world's refining capacity more efficiently," he said.
The Energy Information Agency (EIA) in its latest report dedicated to the effects of removing restrictions on U.S. oil exports analyze several different baseline cases, each of which uses different assumptions on oil prices and U.S. production levels.
In the EIA's reference case, where US production averages 10.4 million barrels per day between 2020 and 2025, the lifting of the US ban on exports has relatively little impact on the market. In this case, EIA believes, the spread between the US and international oil markets is not significant enough for large shipments of US crude abroad to make enough money.
In the higher production cases, where US production averages between 11.7 million barrels per day and 13.6 million barrels per day, the spread between US oil and international crude shows the potential to grow enough to make it worth it, according to the EIA. In these case, exports will allow oversupplied US markets to shift their oil to the global markets.