The notion that OPEC will respond to the end of a U.S. ban on crude oil exports with cuts of its own is "spectacularly" wrong, an advocacy group testified.
The U.S. House Subcommittee on Terrorism, Nonproliferation and Trade heard testimony on the impacts of ending a ban on U.S. crude oil exports.
Arab members of the Organization of Petroleum Exporting Countries in the early 1970s placed an embargo on oil exports in response to U.S. policies on Israel. In response, the U.S. Congress passed legislation that places restrictions on crude oil exports from domestic sources.
Critics of repealing the ban say it would lead to more U.S. oil production, which has risen as explorers tap into lucrative, but environmentally controversial, shale basins in Texas and North Dakota. Stephen Kretzmann, executive director of Oil Change International, testified there are critical market questions to consider should U.S. crude oil reach the international market.
"The conventional wisdom had been that OPEC would counter new supply by reducing production to support higher oil prices," he said. "This conventional wisdom has been proven spectacularly wrong over the last year."
Crude oil prices are down about 50 percent from their June levels. A high rate of U.S. oil production has pushed markets toward the supply side as demand wanes in a weakened global economy. OPEC in November said it would maintain its current rate of production, however, in order to protect its market share.
Industry supporters have argued U.S. trade policies should reflect an era of oil abundance, taking the view that more trade would increase U.S. leverage on the world economic stage.
Rep. Ted Poe, R-Texas, chairman of the subcommittee, said U.S. refiners aren't positioned to refine the lighter grades of crude oil found in domestic shale deposits. As a result, oil companies are laying off workers and states that rely heavily on energy revenue are suffering.
"The solution to this problem is clear: export crude oil," he said.
The Commerce Department's Bureau of Industry and Security said last year that condensate produced in a certain way is not crude oil, but a petroleum product subject to few export restrictions. Condensate is an ultra-light form of oil found in some U.S. shale deposits.
