Editors' Pick: Originally Published Friday, Dec. 18.
U.S. independent oil producers have lobbied for two years for an end to the crude oil export ban.
As a part of the 2016 budget compromise package submitted to President Obama, they're about to finally get it -- at a time when it will do absolutely no good in relieving their struggles against low oil prices.
It is the ultimate irony.
Two years ago, as oil prices hovered above $100 a barrel, U.S. producers were on the cusp of major increases in production from new plays in the Bakken and Eagle Ford shale. But huge domestic production increases brought huge gluts, bringing down domestic prices compared to the rest of the world, in some cases as much as $20 a barrel less.
Thus it was not surprising to see CEOs from companies including Continental Resources (CLR - Get Report) , Hess (HES - Get Report) , ConocoPhillips (COP - Get Report) and Pioneer Natural Resources (PXD - Get Report) lobby their Republican friends for an end to the export ban. While they argued that ending that ban would help U.S. energy independence and stabilize gas prices, the real reason for the push to end the ban was far simpler:
They wanted access to that international premium on oil prices.
Fast forward two years. Oil prices are in free fall, not least because of the irresponsible overproduction mania from these same CEOs in U.S. shale. Production that was undertaken two years ago is only now peaking, keeping the supply glut in the U.S. today at all-time record highs and oil prices at nearly all-time record lows.
That international premium that U.S. oil producers were so keen to gain access to? It's disappeared.
Of course, the end of the export ban was sure to do that. Anyone could see it -- once the wall between U.S. and international supply is breached, the price arbitrage between the two will just as quickly disappear. Otherwise, anyone could make free money just by hiring tankers.
We know nothing's that easy. Apparently, Congress didn't. Nor did the very "smart" CEOs of U.S. independents.
The promise of U.S. energy independence? That's also disappeared.
We are still importing -- yes, bringing in more oil than we have in the last three years, despite our domestic glut of oil. As the prices of oil equalize between here and the rest of the world, cheaper oil becomes accessible to the East Coast from Canada and even from Europe, compared to pipelining or sending cargoes by train from eastern Texas or the Gulf Coast.
How's that for irony?
Those of us who argued against abandoning the export ban could easily see that this would happen, too.
And for the final irony, there is the promise of a further wasting of our shale resources in the most irresponsible way -- pumping rapidly into an already fully supplied and glutted marketplace. Companies dedicated to survival will empty their wells as fast as they can to stay alive, instead of hoarding this fast-depleting resource for that inevitable rainy day when prices recover and we need it here.
That's when the disaster of ending the export ban will become the greatest irony of all. We'll have pumped out our precious shale oil resources overseas when the market needed it the least, and be forced to buy outside oil when prices are higher and we'll need domestic supply the most.
Anyone should be able to see that coming, too.