STOCK MARKET WATCH -- Monday, 19 August 2013

[Fuddnik]

32. Are rising U.S. fuel exports keeping consumer prices high?

Point this out the next time somebody starts complaining about them A-rabs, gouging us at the pump. Or why we need the Keystone pipeline. I explained this to my Dad and a few of his friends in SC a few months ago. They were stunned, and said "Well, we never heard about that"!!!

I told them if they'd spend less time watching Faux Gnus, they might learn something. But then again, no mainstream media reports it either.
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Are rising U.S. fuel exports keeping consumer prices high?
America is exporting record amounts of motor fuel
08/13/2013 | ConsumerAffairs | Gas Prices

http://www.consumeraffairs.com/news/are-rising-us-fuel-exports-keeping-consumer-prices-high-081313.html

By Mark Huffman

Mark Huffman has been a consumer news reporter for ConsumerAffairs since 2004. He covers real estate, gas prices and the economy and has reported extensively on negative-option sales. He was previously an Associated Press reporter and editor in Washington, D.C., a correspondent for Westwoood One Radio Networks and Marketwatch.

As gasoline prices at the pump have climbed over the last four years, so have U.S. exports of refined petroleum products, primarily diesel fuel.

U.S. Energy Information Administration data suggests net exports of refined products will hit a record level of 1.54 million barrels a day this month – more than twice the level of last August's exports. Ironically, the surge in exports coincides with a steady decline this month in U.S. fuel prices.

The reason for the decline in prices is falling demand and the process of switching over to winter-blend gasoline from the more expensive summer blend. It turns out the U.S. just has that much oil these days, and enough refining capacity to ship millions of barrels of diesel fuel overseas.

Some analysts have even declared that the U.S. is fast becoming “petroleum refiner to the world.” Just two years ago the U.S. became a net exporter of petroleum products. Now we're the world's biggest exporter.

Swimming in oil

The U.S. is now swimming in oil, thanks to the oil shale revolution that has turned places like North Dakota into the new Saudi Arabia. The U.S. still has a law on the books – passed during the oil shock of 1979 – that prohibits the export of crude oil, except to Canada and Mexico. The law, however, makes no mention of oil that has been refined into gasoline or diesel fuel.

It's diesel fuel that is leading the petroleum export surge. The profit margins are higher and the international demand is stronger for diesel than gasoline. Much of the world's automobile fleet runs on diesel.

But a number of consumer advocates have wondered aloud in recent months whether this rush to sell refined petroleum products to the rest of the world hasn't hurt the U.S. consumer. If we have so much excess petroleum product, why aren't U.S. pump prices lower? The answer may not be that simple.

Some experts agree

Even some industry experts agree that exports keep fuel prices higher for U.S. consumers, although they disagree over how much. Francisco Blanch, a commodities expert at Bank of America Merrill Lynch, believes the difference is significant. He recently told NBC News that if there were a ban on U.S. petroleum exports, U.S. prices would be much lower while fuel prices would be much higher elsewhere in the world.

The fact that U.S. crude oil can't be exported, he says, also keeps prices down for U.S. consumers. This is an opinion consumers may want to keep in mind, as the Wall Street Journal reports there are whispers in Washington that the law banning crude oil exports needs to be revised.

In fact, during a recent interview President Obama predicted that the Keystone Pipeline will one day carry U.S. crude oil to Gulf Coast terminals for shipment around the world. That can't happen unless the current law is modified or repealed.
Arguments for lifting the ban

In a recent editorial, Bloomberg News called for a reversal of the crude oil export ban, pointing out circumstances have changed drastically since the law was passed. The editorial warns that the ban threatens to put a damper on the U.S. shale oil boom.

OPEC, however, probably hopes the ban remains in place. Prince Alwaleed bin Talal, an OPEC official and a member of the Saudi royal family, recently warned his government that the boom in U.S. shale oil and gas could reduce demand for Saudi crude.
Just a little stability, please

What's best for the U.S. consumer? If you conducted a survey at the gas pump, you would probably find that a large majority favor retaining enough petroleum product in the U.S. to keep prices competitive and predictable. When prices yo-yo as they do throughout the year, it plays havoc with the family budget.

Drivers on the East Coast, meanwhile, would probably like to see the lower gasoline prices drivers in the Southeast enjoy. One reason they pay significantly more for fuel, however, is that their crude oil doesn't come from the new bounty of the oil shale revolution. Instead, East Coast refineries import oil from Europe and the Middle East.

Why can't the plentiful oil from America's heartland be shipped east? It can, but only if transported aboard U.S.-registered tankers. There's a law that requires that.

The refineries say U.S. ships cost more, which would actually result in even higher prices at the pump. It's cheaper, they say, to import the oil they need to produce motor fuel.