Iranian crude could pinch U.S. producers without export freedom, paper warns

WASHINGTON — The United States should not permit Iran to put as much as 1 million barrels per day in crude on the world market without also giving American producers the freedom to sell their oil overseas, according to a Republican white paper released Tuesday.

The paper, written by Republican staff on the Senate Energy and Natural Resources Committee, asserts that if the United States lifts sanctions against Iran, a flood of crude from the country could send oil prices down across the globe.

The paper notes the “great geopolitical irony” that “lifting sanctions will boost Iranian oil exports at a time when federal law and regulations generally prohibit American oil exports.”

If the Obama administration or Congress do not relax those restrictions, “such a shift in would grant Iranian oil producers access to global markets but deny it to American producers,” the paper concludes.

Sen. Lisa Murkowski, R-Alaska, the head of the Energy and Natural Resources Committee, has been pushing for an end to the nation’s longstanding export ban, which applies only to raw, unprocessed crude, and does not affect gasoline, diesel and refined petroleum products.

There are already exceptions for some Californian crude, oil extracted on Alaska’s North Slope and shipments to Canada, but export advocates say more outlets are needed for domestic production that was surging before prices plummeted last year.

Related story: Obama knows crude export ban is bad economics, North Dakota senator says

Domestic oil producers say the export restrictions already are suppressing prices for West Texas Intermediate crude, now trading about $3 to $4 per barrel less than international Brent crude. Iranian oil would only push prices even further down, they warn.

Although any nuclear deal with Iran is sure to lift sanctions against its oil sector, it is not clear how quickly those restrictions would be eased nor how swiftly they might ramp up.

The Energy Information Administration has predicted that Iran has the technical capability to hit at least 700,000 barrels per day of new and restored crude production by the end of 2016. But even sooner, Iran could unleash as much as 30 million barrels of oil now in storage.

The combination could help Iran add about 1 million barrels per day of crude to the global market, EIA administrator Adam Sieminski told the Senate energy panel. And according to the government agency, those extra volumes could push Brent crude prices down by about $5 to $15 per barrel.

Some Northeast refiners are battling a change in trade policy, arguing that it would put them at a competitive disadvantage to European counterparts who could buy American oil and ship it on non-U.S. tankers for cheaper than they could.

Other critics argue that it makes little sense to change the policy when the U.S. is still buying foreign oil, with some of those imports used to supply domestic refineries with a heavier-grade crude.

SHOW MORE