Pundits are debating whether to repeal the ban on U.S. oil exports. Lately, Congress, the energy secretary, energy analysts, energy company officials and almost anyone else with a dog in the fight have pushed for a review of the 40-year-old ban.
Lifting the export ban would almost certainly boost prices and profits for U.S. producers. On a level playing field, it would raise the price of WTI (West Texas Intermediate crude, the U.S. marker crude price) and force the price of Brent crude lower, narrowing the margin between the two. This, in turn, would increase internal rates of return on investments in U.S. crude, encouraging E&P companies to increase U.S. expenditures at the expense of foreign oil and gas spending. For the country, that’s a good thing. For the U.S. offshore industry, maybe not as much.
The problem is the cost of U.S. E&P onshore versus offshore and the profit margins of the two. The average operator can make more money — in some cases, much more money — developing onshore oil and gas potential (read shale oil and gas) versus offshore, especially in deepwater. Therefore, increases in U.S. E&P activity driven by lifting the export ban would not result in significant increases in offshore activity. In fact, it could have the opposite result in the long term.
On the other hand, failure to lift the ban could keep a lid on domestic prices or force them lower, depending on how much and how quickly onshore (shale) production expands without an export outlet. Under that scenario, the cost spread between domestically produced onshore oil and offshore oil would widen, which would not help the offshore industry either. So it appears that lifting the U.S. oil export ban would do little good for Gulf of Mexico activity and might, in fact, be harmful.