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Biden administration weighs US oil export limits again, but analysts so far doubt action

Highlights

US oil exports in April climbed to a record 10.6 million b/d

Crude exports last week jumped 23% to 4.3 million b/d

Export limits would hurt EU search for non-Russian diesel

  • Author
  • Meghan Gordon
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  • Valarie Jackson
  • Commodity
  • Agriculture Energy Transition Natural Gas Oil

While the Biden administration signaled that it was again considering limits to US oil exports to curb high fuel prices, analysts do not think it will make any policy changes as long as the Russian energy crisis looms.

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US Energy Secretary Jennifer Granholm told reporters May 24 during a tour of the Strategic Petroleum Reserve's Bayou Choctaw site in Louisiana that President Joe Biden was "not taking any tools off the table," when asked about US oil export limits, according to Reuters.

The Department of Energy said May 25 that the administration is focused on "working closely with our with our partners and allies to mitigate the effects" of the Russian war in Ukraine.

"That includes executing on the historic release from oil reserves here and around the world, and actions here at home, like allowing E15 use in the summer to help address the Putin price hike at the pump," a DOE spokesperson said in an email.

US oil exports have surged in recent weeks on strong demand from Asia and Europe, hitting 10.6 million b/d for the first time ever in the week ended April 15, according to Energy Information Administration data.

The US exported 10.58 million b/d of crude and oil products in the week ended May 20, up 11% week on week. Crude exports jumped 23% over the same period to 4.33 million b/d, and oil product exports rose 3% to 6.24 million b/d, according to the latest EIA data, published May 25.

An 'eyebrow-raising' comment

Bob McNally, president of Rapidan Energy Group, said Granholm's comment was "eyebrow-raising," considering her comments in December promising to end consideration of a crude export ban.

Granholm assured members of the National Petroleum Council Dec. 14 that the Biden administration was no longer considering such a drastic move after months of hinting that it was an option for curbing high gasoline prices.

McNally, a former energy adviser to President George W. Bush, does not think export limits or a ban are under serious consideration.

"It's back on the table now, but our understanding is that because Russia's invasion of Ukraine is so prominent now and the US priority is to assist allies, we think the odds of them going for export restrictions on oil or gas are lower than they would have been otherwise," McNally said. "I think they were higher back in November and December; that's when it was much more possible."

Scrambling for diesel

Analyst Matthew Blair of Tudor, Pickering, Holt & Co. said export restrictions would be "fairly damaging to US refiners, given their net export position."

Net US distillate and gasoline exports accounted for 15% and 4%, respectively, of US refinery output in January and February, Blair said.

Restrictions on the flows would likely lead to sharply higher inventories, weaker cracks, and lower capture rates given additional RIN expose, Blair said in a May 25 note.

"Hopefully, this potential action is fairly unlikely given the geopolitical ramifications of pulling diesel off the global market at a time when allies in Europe are scrambling to replace lost Russian diesel exports," he said. "If it did happen, we see Gulf Coast refiners most at risk."