Exxon Mobil Corp.’s push to export U.S. oil overseas is facing a new obstacle: Falling gasoline prices.
A flood of new oil from Texas to the Great Plains has swamped refineries, driving down prices at the pump 10% since March, while global oil prices have hovered at about $107 a barrel. That suggests the world crude market is having waning influence on U.S. gasoline, which instead is beginning to track lower-priced domestic oil.
U.S. supplies are having a greater impact because they’re making up a bigger part of the gasoline market, supplying about 53% today, compared with 34% less than three years ago.
As cheaper oil translates to cheaper gasoline, Exxon and ConocoPhillips will have a tougher time convincing legislators that ending export restrictions that date back to 1970s oil shortages would benefit the nation, said Sandy Fielden, director of energy analytics at consultant RBN Energy LLC.
If more exports are allowed, “The most obvious thing that’s going to happen is that crude prices will go up and so will gasoline,” Fielden said.
Investors are betting the trend will continue, and that West Texas Intermediate, the U.S. benchmark for oil, will drop about 17% by December 2016. A contract for delivery in that month trades at about $80 a barrel, compared with about $97 today.
Lifting strict export limits would halt the decline in U.S. crude prices while costing motorists as much as $10 billion a year in higher fuel prices, according to Barclays Plc. Gasoline prices reached a three-year low last year and should continue to drop through 2015, according to the U.S. Energy Information Administration.
Senator Lisa Murkowski, the top Republican on the Senate Energy and Natural Resources Committee, has joined Exxon, the American Petroleum Institute and the U.S. Chamber of Commerce in calling for an end to crude export restrictions that were put in place after the Arab oil embargo in 1973 triggered gasoline shortages in the U.S.
“The reality is the market has moved from an era of scarcity to an era of abundance -- but we’re still saddled with statutes and regulations stuck in a mindset of scarcity,” said Kenneth Cohen, the vice president who oversees Exxon’s lobbying efforts, in a December interview.
The debate over exports is splitting the energy industry. Oil producers such as billionaire Harold Hamm’s Continental Resources Inc. want leeway to send their crude abroad for higher prices. Some refiners want U.S. oil to remain landlocked, offering them a cheaper feedstock for their plants.
Copyright 2014 Bloomberg. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.