Lifting the Oil Export Ban: Where the Refiners Stand
As the debate over whether to lift the U.S. ban on crude oil exports intensifies, producers will clearly benefit, but the situation for refiners is more complicated. Still, most are lining up on the side of big oil and free trade.
For the producing majors, lifting the export ban is a clear win because all that increased crude production at home has reduced prices while at the same time, new horizontal drilling methods are much more expensive than the conventional. But for refiners, who are enjoying the cheap domestic prices for crude, the math is not that simple. The U.S. banned most oil exports after the Arab oil embargo of the 1970s.
While supermajor oil companies like Exxon Mobil (NYSE:XOM) and ConocoPhillips (NYSE:COP) are keen to see the U.S. ban on oil exports lifted, at least one big U.S. refiner, Valero Energy Corp. (NYSE:VLO), which has profited from the ban, is speaking out against the gaining momentum behind the idea. Valero Energy buys cheap oil in the U.S. and sells gasoline and diesel to Europe, Latin America, and West Africa. Valero is fearful that its profits would take a hit because lifting the crude export ban would potentially raise oil prices at home and in turn push prices up at the gas pump, leading to refinery closures that have only just recouped from earlier high oil import prices.