By Bradley Olson and Dan Murtaugh
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 percent 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 percent today, compared with 34 percent less than three years ago.
Moving crude: ConocoPhillips CEO calls for removing crude oil export ban
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 percent 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.
40 years later: Foreign oil dependence has soared since the embargo
The debate over exports is splitting the energy industry. Oil producers such as billionaireHarold 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.
In a strategic sense, the U.S. is not alone in how its policies prioritize refining over exports. Countries from Saudi Arabia to Brazil are seeking to boost their refining capacity, spending billions to create manufacturing jobs or reduce imports, said Charles Kemp, a senior consultant at Baker & O’Brien Inc.
Advocates of more oil exports have warned that unless the limits are lifted, the production boom that has boosted U.S. oil output to the highest level in 25 years will slow. Opening the spigot of U.S. crude to the world will lower the trade deficit and boost employment, replacing outdated regulations that now allow exports of refined products such as gasoline and diesel but limit crude, Murkowski said in a Jan. 7 speech.
A central argument for opening exports, made by Murkowski and ConocoPhillips Chairman and Chief Executive Officer Ryan Lance, hinges on the contention that shipping American oil abroad would bring down world prices, and thus reduce gasoline prices. That’s because imports of crude from abroad have historically tied U.S. gasoline markets more closely to the global Brent benchmark price for crude.
Falling gasoline prices, even with export restrictions remaining in place, are eroding that argument. New supplies of oil from North Dakota and Texas have outstripped processing capacity in some refineries, resulting in U.S. crude selling for about $11 a barrel less than global varieties.
Refiners who benefit from the lower costs of crude are passing about $3 a barrel of that discount on to consumers, which translates into annual savings of more than $9.5 billion last year and an expected $9.6 billion this year, Barclays analyst Paul Cheng said in a Jan. 22 note to investors. The ultimate benefit is even greater as the savings ripple through the U.S. economy in a multiplier effect, Cheng said.
After a ban on exporting Alaskan crude was lifted in 1996, pump prices on the West Coast surged to a premium of 15 cents a gallon higher than elsewhere, 10 cents more than in 1995, according to an analysis released today by the Center for American Progress.
“The lower domestic price for oil benefits families, businesses, and the overall economy,” the center said.
Environmental effort: Climate change warning stickers on gasoline pumps?
The U.S. retail price for regular gasoline fell to $3.279 a gallon yesterday, according to Heathrow, Florida-based AAA, the nation’s largest motoring company. The countrywide average rose to within a cent and a half of $4 in April 2011.
Prices at the pump in the U.S. have typically tracked closely with the global Brent oil benchmark in the U.K.’s North Sea as East Coast refiners used foreign oil priced against Brent because they couldn’t access domestic crude. European plants also sent gasoline toNew York as U.S. oil production slumped after peaking in 1970.
As oil output began rising in 2009, spurred by horizontal drilling and hydraulic fracturing that unlocked new resources in dense shale rock, the imports that helped set U.S. prices began to slow. The U.S. imported an average of 576,000 barrels of gasoline a day in 2013, the lowest since 2000, EIA data show.
For most of January, gasoline prices tracked more closely with cheaper domestic oil than with the Brent price. This correlation means that gasoline prices have fallen in step with domestic West Texas Intermediate oil as crude production boosted supplies, according to data compiled by Bloomberg.
The lighter weight oil from shale fields, which has fewer impurities, tends to yield more gasoline, a factor that could further boost supply and potentially decrease prices if oil export restrictions remain in place, John Auers, a senior vice president at industry consultant Turner Mason & Co.
“From a long term fundamental standpoint, gasoline prices are going to be pretty attractive,” Auers said. “We’ve seen those high, $5-a-gallon prices and we’re not going back to those for any length of time.”
Also on FuelFix:
Pain at the pump? Smile. At least you don’t live in Norway.
Kristian Helgesen / Bloomberg
No. 2 -- Norway, $9.97/gallon
Norway is the only major oil producer with expensive gas. The Scandinavian country doesn't subsidize fuel at the pump, using its oil profits instead for national services, such as free college education and savings for infrastructure improvements.
[Photo: A customer refuels his vehicle with diesel fuel on the forecourt of a gas station operated by Statoil ASA in Oslo, Norway.]
ILVY NJIOKIKTJIEN / NYT
No. 3 -- Netherlands, $8.95/gallon
The Netherlands has the most bicycles per capita in the world. The bike-pedaling Dutch have the highest fuel tax in the European Union.
[Photo: Patrick Langevoort charges his electric car at his workplace in Arnhem, Netherlands.]
Waitscm / Flickr
No. 5 -- France, $8.52
The price of French gas climbed 1.6 percent from the previous quarter. Still, with high incomes and low rates of gas consumption, the French spend a relatively small proportion of their paychecks fueling up.
PATRICIA DE MELO MOREIRA / AFP/Getty Images
No. 8 -- Portugal, $8.38
Portuguese gas prices declined 5 percent for the quarter. The gas tax is one of several levies expanded in Portugal since 2001 to protect the environment. Taxes account for 4 percent of the price of gas in Portugal.
Studio H / Flickr
No. 9 -- Hong Kong, $8.21/gallon
On average, Hong Kong residents pay 72 percent more for a gallon of gas than their neighbors in China, where the government caps the price. Hong Kong and China are both among the world's smallest consumers of gasoline per capita. In fact, Hong Kongers spend a smaller portion of their paychecks on gas than the people of any other country except Venezuela.
Ilovebutter / Flickr
No. 12 -- Germany, $8.09/gallon
A German driver filling the 14.5-gallon tank of Europe's most popular car, Volkswagen's Golf hatchback, pays $117.31, compared with $51.04 for the same fill-up in the U.S.
Andrewbatman / Flickr
No. 13 -- United Kingdom, $7.99/gallon
U.K. gasoline prices declined about 8.8 percent in April compared with a year earlier. The price of gasoline in the U.K. has risen more than 66 percent over the past decade, driven by increases in both taxes and fuel prices, according to the Office of Fair Trading. Last year, about 60 percent of the per-gallon cost went to taxes, 32 percent paid for the crude oil and the rest went to the retailer.]
KRISTIAN LINNEMANN / AP
No. 15 -- Denmark, $7.93/gallon
The price of gasoline in Denmark declined 3.5 percent for the quarter, lowering the country's price rank by five positions.
David Silverman / Getty Images
No. 16 -- Israel, $7.86/gallon
The price of gas has been the biggest complaint behind cost-of-living demonstrations in recent years. Israel caps the price of 95-octane gas, while allowing other forms of the fuel to fluctuate. Taxes typically make up about half the cost of a gallon.
[Photo: Drivers fill up at a gasoline station in Raanana in central Israel.]
Valentin Flauraud / Bloomberg
No. 20 -- Switzerland, $7.26/gallon
Switzerland ranks 11th in the amount of gasoline consumed per person. Despite that indulgence, the Swiss maintain some green credentials. Investments in hydroelectric, nuclear and wind power leave them with a carbon dioxide emissions rate that's less than half the average of OECD nations.
[Photo: A Swiss national flag flies from a flagpole above Lake Geneva in Geneva, Switzerland.]
SZILARD KOSZTICSAK / AP
No. 21 -- Hungary, $7.16/gallon
Production of Hungary's oil and natural gas resources has peaked and is expected to continue to decline, according to the OECD. More than 80 percent of the country's oil is imported from Russia. Gas prices declined 0.7 percent fo the quarter.
[Photo: Hundreds of Volkswagen Beetles parade across the Elizabeth Bridge over the River Danube during the traditional spring 'swarming' of Beetles in Budapest.]
CRISTINA QUICLER / AFP/Getty Images
No. 22 -- Spain, $7.11
Demand for new vehicles in Spain dropped 13 percent last year despite a government program offering discounts of 2,000 euros ($2,590) on a new car for drivers willing to part with their old wheels. Despite some signs of recovery, gas consumption fell 10 percent in March from a year earlier, according to government data.
[Photo: Truck drivers block traffic on the motorway into Seville as they demonstrate against rising fuel costs in 2008.]
DIETER NAGL / AFP/Getty Images
No. 23 -- Austria, $7.09/gallon
Austrians buy less gas and pay less for it than the European average.
[Photo: Austrian truck drivers block the road during a protest in front of the Austrian parliament in 2008 in Vienna. Up to 1400 truck drivers protest in and around Vienna against the high fuel prices, taxes and road tolls.]
Virginia Mayo / Associated Press
No. 25 -- Cyprus, $6.93
With above-average gas prices, low incomes and lots of driving, Cypriots give up the third-greatest share of income to fueling up. The only countries whose people spend more are South Africa and Greece. Transporting gasoline to island nations like Cyprus adds to the price. Cyprus has the lowest gasoline taxes in Europe.
LEE JAE-WON / REUTERS
No. 27 -- South Korea, $6.77/gallon
Despite being one of the world's smaller nations -- roughly the size of the U.S. state of Indiana -- the country is a leader in cars. South Korean brands led by Hyundai and Kia are now responsible for 10 percent of the U.S. car market for ages 25 to 34, according to Edmunds.com.
[Photo: A gas station employee holds a gas pump to fill a vehicle in Seoul.]
STATON WINTER / BLOOMBERG NEWS
No. 30 -- New Zealand, $6.69/gallon
New Zealand consumes about twice the gasoline per person as the ranking's average of a quarter gallon a day. It has the fourth-highest rate of car ownership, with 712 cars for every 1,000 people, according to the World Bank.
[Photo: A pedestrian walks past a gas station in Auckland, New Zealand.]
Gary Peach / Associated Press
No. 32 -- Estonia, $6.53/gallon
Estonians use less gasoline than the global average, but with their relatively low incomes, the fuel bill takes a toll on family budgets. The price of gas declined 2.5 percent for the quarter.
[Photo: The new, state-of-the-art Enefit280 oil shale refinery in northeastern Estonia]
DANIEL MIHAILESCU / AFP/Getty Images
No. 34 -- Romania, $6.48
The price of gasoline in Romania declined 3.2 percent for the quarter. Romanian gas consumption is a quarter of the ranking's average. The country has the fourth-lowest gasoline tax rate in Europe.
[Photo: A stray dog walks along a crosswalk in Bucharest, Romania.]
MUNSHI AHMED / BLOOMBERG NEWS
No. 36 -- Singapore, $6.22/gasoline
Singapore has some of the largest refineries in the world. The country imports oil and ships gasoline back to oil-producing countries in the Middle East. Gas prices declined 1.2 percent for the quarter.
[Photo: Motorists fill up their cars at an Esso gas station in Singapore.]
Nemo\'s great uncle / Flickr
No. 38 -- Japan, $6.09/gallon
Japan's long-standing national gasoline tax helped the country's carmakers take an early lead in developing fuel-efficient vehicles. The price of gas tumbled 9.2 percent for the quarter.
RICK RYCROFT / AP
No. 39 -- Australia, $5.87
Relying on fossil fuels for electricity is getting more expensive in Australia after the government's controversial tax on carbon dioxide emissions was imposed last year. The carbon tax doesn't apply to driving, which means the nation can continue to enjoy its relatively pain-free pumping.
[Photo: Ally Clements fills her car a Sydney service station, Australia.]
DENIS FARRELL / AP
No. 40 -- South Africa, $5.38
With low per capita incomes and moderate gas use, South Africans are second to none in the share of their paychecks that goes to fueling up. The situation in South Africa worsened over the quarter, with a 6.2 percent increase in the price of gasoline. Pump prices are determined on a monthly basis by the Central Energy Fund, a state-owned entity set up in 1997.
[Photo: Laborers sit in the back of a "bakkie" during rush-hour traffic in Johannesburg, South Africa.]
Pablo Aneli / AP
No. 41 -- Argentina, $5.23/gallon
Argentines account for 13 percent of the world's natural gas vehicles. They also produce the fifth-highest volume of biofuels in the world -- 50,340 barrels per day.
[Photos:Truck drivers wait at a roadblock in Tandil, Argentina.]
Brent Lewin / Bloomberg
No. 42 -- India, $5.07/gallon
In India, low wages and limited infrastructure result in widespread energy poverty. Energy subsidies account for about 10 percent of India's annual budget, according to government estimates. The average Indian needs to work more than a full day to afford a gallon of gasoline. Due to the cost, this country of 1.2 billion people has the lowest per capita consumption.
[Photo: Employees stand at a Bharat Petroleum Corp. gas station in New Delhi, India]
NANA BUXANI / BLOOMBERG NEWS
No. 43 -- Philippines, $4.89/gallon
Filipino's pain at the pump is partly offset by an unconventional energy resource available to their economy. The country is the world's second-biggest producer of geothermal energy after the U.S., according to the International Geothermal Association. The nation of 95 million people and 7,100 islands uses this natural resource for about 17 percent of its energy needs.
[Photo: Motorists fill up at a gas station in Manila, the Philippines.]
Reinaldo D'Santiago / AP
No. 44 -- Colombia, $4.83/gallon
Colombia's annual inflation rate this year unexpectedly dropped to its lowest point in more than three years. That's partly due to declines in transportation costs after the government cut a tax on gasoline. Thirteen percent of the country's vehicles run on compressed natural gas, the seventh-highest rate in the world, according to NGV Europe, a trade group for natural gas vehicle companies.
Anonymous / Associated Press
No. 45 -- China, $4.75/gallon
With a population of 1.3 billion, China is the world's second-biggest oil consumer after the U.S. China regulates the price of retail gasoline and diesel fuel to curb inflation. The country's total consumption is formidable; the per capita consumption is not.
PORNCHAI KITTIWONGSAKUL / AFP/Getty Images
No. 46 -- Thailand, $4.68
Thailand has cheap gas relative to most nations, but it's a steep price for many Thais. The cost of filling up jumped 5.7 percent for the quarter.
[Photo: A Thai worker changes an gasoline price sign at a service station in Bangkok.]
Elaine Thompson / Associated Press
No. 47 -- Canada, $4.62/gallon
Canada is the world's sixth-biggest oil producer and has higher income per person than the U.S. These stats add up to cheap gas and little pain at the pump. Only Americans use more gas per capita than Canadians. Canada's gas price fell 2.9 percent for the quarter.
EDWARD A. ORNELAS / SAN ANTONIO EXPRESS-NEWS
No. 48 -- Pakistan, $3.95/gallon
Instead of gasoline, most Pakistanis opt for cheaper and cleaner compressed natural gas. CNG fuels about 89 percent of the nation's auto fleet. Pakistan has about 3.1 million CNG vehicles on the road, the most of any country, according to NGV Global, a trade group for natural gas vehicle companies.
[Photo: Traffic crowds a street in Rawalpindi, Pakistan.]
ROMEO GACAD / AFP/Getty Images
No. 49 -- Indonesia
While the official price of gasoline is $3.83 a gallon, most Indonesians pay just 4,500 rupiah per liter ($1.74 a gallon) for a subsidized grade of gasoline that has a lower octane than what's available in most countries. The program will cost as much as $31 billion this year.
[Photo: An Indonesian fuel attendant fills up a motorists car in a last minute rush at Pertamina fuel station, a state-owned petroleum company in Jakarta.]
MIKHAIL METZEL / AP
No. 50 -- Russia, $3.60
Russia is the second-biggest oil producer, after Saudi Arabia, and has some of the world's cheapest gas prices. Russian prices jumped 4 percent for the quarter.
[Photo: An employee of a BP gasoline station walks in Moscow.]
Elaine Thompson / Associated Press
No. 51 -- United States, $3.52/gallon
The U.S. pays more than any other nation to keep fossil fuels cheap, and its gas costs $2.48 less per gallon than average. With all that cheap gas, Americans burn through 1.2 gallons per person each day -- 31 percent more than anyone else.
TREVOR SNAPP / BLOOMBERG NEWS
No. 52 -- Mexico, $3.40
The world's seventh-biggest oil producer has been gradually cutting the subsidy it provides at the gas pump as a way to keep expenses in check and to remove incentives for wasting gas. Out of all the OECD member countries, only the U.S. pays less in taxes. The price of gas jumped 5.7 percent for the quarter, the fourth-biggest increase.
[Photo: A gas station attendant washes a customer's window while waiting for his tank to fill up at a Pemex station in Mexico City, Mexico.]
Munshi Ahmed / Bloomberg
No. 53 -- Malaysia, $2.31/gallon
Malaysia is a significant producer of oil and is well located for trading energy by sea. The country's reserves are third highest in the Asia-Pacific region, after China and India.
[Photo: Traffic moves past Johor Port in Pasir Gudang, Johor, Malaysia.]
BEHROUZ MEHRI / AFP/Getty Images
No. 55 -- Iran, $2.16/gallon
Iran is the fourth-biggest oil producer and in 2010 had the highest fossil-fuel subsides in the world. In December 2010, Iran began a five-year program to reduce subsidies and bring gas and electricity prices more in line with the international market. The plan was blamed for nationwide inflation surpassing 30 percent.
[Photo: An Iranian motorist pumps gasoline as women pass by a petrol station in downtown Tehran.]
Kamran Jebreili / Associated Press
No. 56 -- United Arab Emirates, $1.77
The U.A.E. is the eighth-biggest oil producer in the world. The country subsidizes about 68 percent of the cost of gasoline, as of 2010. Despite its oil wealth, the U.A.E. has long had to import its gasoline because it lacks refining capacity.
[Photo: A ship docks at the refueling station in Fujairah, United Arab Emirates.]
No. 57 -- Egypt, $1.03/gallon
The administration that came to power in August pledged to overhaul the energy industry and curb fuel subsidies. The country still has the fourth-cheapest gas in the world, and prices declined a further 9.3 percent for the quarter.
Miskan / Flickr
No. 58 -- Kuwait, 80 cents
Petroleum accounts for almost half of Kuwait's gross domestic product and 95 percent of its exports and government income. Gas prices aren't felt much by Kuwaitis, who are the third-biggest consumers of gasoline after the U.S. and Canada.
No. 59 -- Saudi Arabia, 45 cents/gallon
Saudi Arabia, which holds one-fifth of the world's oil reserves, is pursuing wind, solar and nuclear power to help cut in half the crude and natural gas it burns to generate electricity. The country wants to generate a third of its electricity from alternative energy sources within two decades. Saudi Arabia is OPEC's biggest producer and heavily subsidizes the price of gasoline.
[Photo: A Saudi man fuels his vehicle at a gasoline station in Riyadh, Saudi Arabia.]
SpannerDan / Flickr
No. 60 -- Venezuela, 4 cents
Dreaming of cheap gas? Fill up in Venezuela, where gas is practically free. Venezuela is a poor country the burns through gas like a rich one.The cost of filling up the 39-gallon tank of a Chevrolet Suburban in Venezuela is $1.56, compared with $137.28 in the United States.