Daily Management Review

The World Market is Not Afraid of American Oil


On Wednesday, the US Congressional leaders reached a compromise on the bill that would remove the ban on the oil export. On Tuesday, OPEC Secretary General Abdullah al-Badri said that lifting the ban on American oil exports by the US Congress will not have a significant impact on world prices. However, some analysts do not agree. They believe that if the US will start export oil, it will cause "structural changes" in the market.

Gregory Varnum
Gregory Varnum
The US Congressional leaders reached an agreement to lift the ban on the oil export from the country, according to Bloomberg. The adoption of this law will continue funding the US government. According to the Speaker of the House of Representatives Paul Ryan, House of Representatives plans to vote on the comprehensive bill on budget expenditure on Thursday. After that, it will be sent to the Senate.

At yesterday's press conference in New Delhi, OPEC Secretary General Abdullah al-Badri said that "the possible export of American oil to the world markets will have no effect on prices." He explains this by the following argument: "the United States still remain an importer of crude oil and petroleum products as a whole. They can export oil in some countries, but at the same time they have to import it from other countries." Head of OPEC said that US manufacturers can export the lighter grades of oil, yet heavier grades will still be purchased from other countries.   

Recently, the oil industry players have revived discussion of the possible consequences of removing the nearly 40-year-old ban, put by the US Congress, on export of the American oil abroad. Earlier, representatives of factions of the Republican and Democratic parties in the US Congress came close to removing the ban imposed in the years of the oil crisis in the mid-1970s. US media reported on Monday that the decision was not taken merely because the Republicans and Democrats could not agree on some technical points.

However, not all agree that the open door for the American oil to the world markets will not affect the prices. "We believe that any lifting of the export ban will cause structural changes in the market, - quotes Reuters Olivier Jakob, analyst at Petromarixx. - Lifting the ban will help release some of the US oil storage tanks."

As stated earlier by White House spokesman Josh Ernest, the administration of US President Barack Obama remains opposed to lifting the ban on oil exports.

source: bloomberg.com