Oil industry at odds over U.S. export ban

Longtime oil man urges energy strategy

In January, famous energy investor T. Boone Pickens made noise at a natural gas conference in Houston when he said he wasn't all that "keen" on lifting the U.S. ban on exporting crude oil right now.




A number of oil refiners are pushing back against lifting the ban on the grounds it will drive up not just their costs but motorists' as well.

"It's one piece of a much larger U.S. energy policy," said Mike Jennings, CEO of Dallas-based refiner HollyFrontier. "Our company understands the need for open commerce in creating wealth. We believe in free trade. But let's not make one piece free and still have heavy regulation on other facets."



Sheffield, in an interview last week, said the ban put American drillers at an even greater disadvantage and could potentially decimate the nation's booming oil business.

"Right now, we have around 1,400 rigs in the shale when you add up all the plays," he said. "If oil gets below $80, you'll start seeing those rig counts drop, and then you have layoffs and people out of work, and then all of a sudden you start importing foreign crude again from the Middle East."




"I like to call it a four-way cage match. Producers on one side and consumers, like the chemical companies and refiners and we the public, on the other. It's tough for the environmentalists. They do want energy prices to go higher, but do they want to be in bed with the oil companies? And then there's the hawks. They want to keep the supply domestic. But depressing world oil prices would hurt Middle East countries," he said. "No one really knows what to make of this whole new world."




"It's the export market. The U.S. has become, even with our capacity constraints, the world's largest oil product exporter on a gross basis," said John Grimes, managing director with the investment banking firm Duff & Phelps. "The projections out to 2018 show increased investment in a wide variety of downstream assets."


One of the issues they plan to home in on is national security, something their opponents also are latching onto. The message from producers, as Sheffield puts it, would be a decline in the U.S. oil industry means more imports from the Middle East and "sending troops to the Middle East for the next 100 years."


"It's a crazy patchwork of things that have kept this market from being efficient," he said. "The export ban was based on the mindset that we're in a resource scarcity situation with rapidly increasing demand and supply from an unreliable source in the Middle East. It's only now people are starting to think we aren't a resource-scarce country."

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