Export Laws

Last week RBN co-hosted the “Surviving the Flood” conference with Turner, Mason & Company in Houston. The major theme of the conference was the expected timing and likely impact of a “Day of Reckoning” for the US oil market that could come any time between 2015 and 2020 depending on critical factors influencing market dynamics. If and when the big day arrives, and if export rules don’t change and refinery hardware is not upgraded, Gulf Coast light Louisiana sweet (LLS) crude could be trading at a discount of $15-$20/Bbl to international light sweet benchmark Brent. Today we discuss the day of reckoning and its critical influencers.

Energy Information Administration (EIA) data for January 2014 indicates that US crude production has now returned to levels not seen since December 1988. Canadian crude production is also at record levels. The prospects look good for a combination of US production and Canadian imports to free the US from overseas imports by the early 2020’s. But along with this success comes a challenge balancing new streams of crude that are predominantly light with a lot of refinery capacity configured to process heavier crude. This balancing act is compounded by a ban on US crude exports. Today we review the contrast between crude and refined product export rules.