Loveless: Is the U.S. ready to export oil?

Bill Loveless | Special for USA TODAY

Ryan Lance, the CEO of ConocoPhillips, knows a tough battle when he sees one. Among the latest challenges for him and other U.S. oil producers is persuading the public and the government that exporting American oil makes sense even as the nation continues to buy supplies from abroad.

And Lance suggests the industry is running into resistance and out of time.

"It certainly feels like trying to push uphill a little bit to get some momentum behind it," the head of the world's largest independent exploration and production company said the other day at a U.S. Chamber of Commerce event in Washington.

"Everybody I talk to believes it's good policy, and people are trying to figure out the politics of the situation a little bit, and how they can represent it back home to their constituents because it is counterintuitive," Lance said. "Why would we be exporting at the same time we're importing?"

U.S. oil imports are falling, as domestic production increases. Last year, the U.S. relied on foreign oil for 27% of its demand, down from a high of 60% in 2005. And even to the extent that the U.S. relies on imports, two of the top three providers are neighbors Canada and Mexico. So, imports present far less of a threat to the U.S. than they did years ago.

Still, as U.S. Energy Secretary Ernest Moniz told me last fall, "We remain a very large importer of oil."

The problem for oil producers is that the resurgence in U.S. output involves light crude from shale formations whose composition doesn't match up well with refineries on the Gulf Coast. Those facilities were designed years ago to handle heavy crude from Mexico and Venezuela.

"Light oil production today already exceeds our capacity to refine it," Lance said. "So the U.S. crude price is trading at $10 a barrel below the global crude price."

That oversupply results partly from refinery maintenance that takes place at this time of year, as facilities prepare to switch from winter fuel blends to summer supplies. But Lance said that seasonal surplus will become a year-round phenomenon by 2017.

By 2020, he added, U.S. producers will need to export as much as 2 million barrels a day to relieve the excess light crude, or risk curtailing operations.

The solution, Lance and other U.S. producers argue, is for the U.S. to lift a 40-year-old ban on oil exports, a restriction enacted by Congress in response to the Arab oil embargo, supply shortages and gasoline lines, within a couple of years.

"There would be major benefits from crude oil exports," Lance said. "In the world market, light oil sells for more than heavy oil. So the U.S. would gain by exporting our surplus light oil, and then importing the less expensive heavy oil that our refineries are built to handle."

At the pump, motorists would also benefit from U.S. oil exports, Lance said, citing several major studies in support of his comments. Fuel prices, which follow world oil prices, would soften as more U.S. oil enters the global market, he added.

But for all those studies, the fact remains that calls for ending the export ban are raising doubts in Congress, even among Republicans normally supportive of the oil industry. Moreover, some lawmakers fear a backlash from voters distrustful of industry claims about gasoline prices and from some local refiners eager to see the domestic discount continue.

Even as Lance spoke at the chamber, leaders of a House panel holding a hearing on oil markets said they won't decide soon whether to propose lifting the export ban. Michigan Republican Fred Upton called for "a deliberative approach" to the issue.

Among the witnesses at the hearing was Graeme Burnett, senior vice president of Delta Air Lines, which owns an oil refinery in Pennsylvania, and opposes lifting the export ban. Burnett cited a survey commissioned in New Hampshire by an anti-export group that found that 85% of the state's voters say the U.S. should limit oil exports if doing so keeps gasoline prices from rising here.

Speaking of New Hampshire, the state's first-in-the nation primary for Republicans and Democrats is 11 months away.

The election calendar isn't lost on Lance.

"We've got to gain some traction this year," he said. "Certainly, as we go into an election year, it gets harder."

Bill Loveless — @bill_loveless on Twitter — is a veteran energy journalist and television commentator in Washington. He is a former host of the TV program Platts Energy Week.