But American Petroleum Institute CEO Mike Sommers told CNN that the powerful oil-and-gas trade group is “absolutely” taking the risk of an export ban seriously, including by leaning on moderate Democrats to talk White House officials out of the idea.
“We’re marshalling all of our forces. We’re doing everything we can,” Sommers said during an interview in his Washington office.
Sommers warned that not only would an export ban backfire on US drivers by jacking up prices at the pump, it would help foreign producers by boosting their revenue and market share.
“It would be a gift to OPEC and Putin,” the API CEO said, referring to Russian President Vladimir Putin.
‘Oil shock across the world’
“A ban on US crude oil exports will boost domestic supply and put downward pressure on prices for American families,” the lawmakers wrote in a letter to Biden.
Sommers made exactly the opposite point, arguing an export ban would cause gasoline prices to move higher, not lower. He pointed to how oil is a globally-traded commodity and the world market relies on 3 million barrels a day of US exports.
“This would lead to an oil shock across the world,” Sommers said.
Pressure on the White House to ban oil exports has gone down because oil prices have plunged.
After flirting with $85 a barrel in mid-November, US oil prices recently dropped below $65 a barrel. The selloff began in anticipation of the coordinated release of strategic reserves by the United States, China and other nations. Prices fell even further on fear the Omicron variant would dent energy demand.
Why export ban doesn’t make sense
But Big Oil isn’t alone in making this case.
Multiple industry experts have told CNN that while banning US oil exports would drive down US oil prices (known in the market as West Texas Intermediate), it would simultaneously raise the price of Brent crude, the global benchmark. And that’s a problem because gasoline is priced off Brent, not WTI.
Brent prices would likely move higher, perhaps sharply so, because the world oil market would lose access to roughly 3 million barrels of supply (barrels normally shipped from the US overseas).
The biggest problem is that the United States is not an island to itself. The decades-old refineries along the Gulf Coast can’t rely solely on US shale oil, which tends to be lighter than oil overseas. To churn out gasoline, diesel and jet fuel, these refineries typically blend shale with heavy barrels imported from Canada, Mexico, the Middle East and elsewhere.
“I think the administration is becoming wise to this,” Sommers said.
However, the API boss said the trade group is still working with Democrats in Congress to tell the White House this is a “really, really bad idea.”
And Sommers pointed to the national security implications, including the risk of a military conflict between Russia and Ukraine.
“This is the opposite time when we should be pulling back from the world,” he said.
Asked about the impact of Biden’s decision to tap the Strategic Petroleum Reserve, Sommers described the release as a “drop in the bucket” and downplayed the long-term impact.
“There is an old saying that the success of a rain dance depends on the timing,” Sommers said, pointing to the impact from the Omicron variant.
The Biden administration’s 50-million-barrel release is the largest in US history.
Although the oil market could see a “short-term blip” from the SPR release, Sommers argued rebounding demand and supply constraints suggest “we’re going to continue to see high prices.”
Home heating sticker shock
“This corporate greed is inexcusable,” Warren wrote, “and represents the results of a rigged system that enriches energy company executives and investors, and leaves American families struggling to pay the bills.”
Sommers, whose group represents Cheniere and other exporters of liquefied natural gas (LNG), said he’s “concerned” about the risk of a natural gas export ban.
He pointed to how US allies in Europe and Asia have long-term contracts to buy US LNG and banning exports would force them to turn to China and Russia for energy.
“One really good way to ruin our standing in the world is to violate those contracts at a time of high energy costs,” Sommers said.