adplus-dvertising
Connect with us

Business

Reinstating An Oil Export Ban Would Be A Disaster For The U.S. – OilPrice.com

Published

 on



Reinstating An Oil Export Ban Would Be A Disaster For The U.S. | OilPrice.com

Trending Discussions

Premium Content

In December 2015, President Obama signed into law the Consolidated Appropriations Act, 2016. A provision of this bill repealed a crude oil export ban that the U.S. had in place since 1975. This repeal was part of a deal that also extended certain renewable energy tax credits.

The shale oil boom had created a glut of light, sweet crude in the U.S. The export ban had made it difficult to ship crude oil to countries other than Canada. Domestic refiners had invested heavily to process imported crudes that were becoming heavier and more sour each year. In the span of a few years, they were awash in light, sweet crude oil from the shale oil plays that wasn’t a good match for their refineries.

Implications of Ending the Crude Export Ban

The provision addressing the export ban says that “to promote the efficient exploration, production, storage, supply, marketing, pricing, and regulation of energy resources, including fossil fuels, no official of the Federal Government shall impose or enforce any restriction on the export of crude oil.”

The bill allows for exceptions to this rule in certain circumstances. The President can impose export licensing requirements for up to a year after declaring a national emergency, or if the Secretary of Commerce reports that crude oil exports are causing supply shortages or sustained premiums on domestic crude above global prices.

Following the repeal of the export ban, monthly crude oil exports from the U.S. soared, rising from less than half a million barrels per day (BDP) in 2015 to more than 3 million BPD in 2019.

The repeal provided some relief to U.S. oil producers suffering from an oil price collapse that began in 2014. However, there are plenty of people who aren’t happy about the change. Related: Jim Cramer: ‘’Fossil Fuels Are Done’’

Why Some Presidential Candidates Want to Bring Back the Export Ban

In fact, several candidates for President have promised to reinstate the crude oil export ban. Elizabeth Warren, Bernie Sanders, and Tom Steyer have all said they support reinstating export limits. Joe Biden has supported phasing in new export limits. Andrew Yang and Michael Bloomberg have stated that they would not support reinstating the ban.

The concern is whether growing U.S. crude oil exports are causing an increase in global carbon dioxide emissions.

This week Greenpeace and Oil Change International released a report that argues for reinstating the ban. From their Executive Summary:

“In this briefing, we find that reinstating the U.S. crude oil export ban could lead to reductions in global carbon emissions by as much as 73 to 165 million metric tons of CO2-equivalent each year.”

They further claim:

“This range of carbon emissions reductions is the equivalent of closing between 19 and 42 coal plants, and delivers a carbon benefit comparable to implementing President Barack Obama’s proposed light-duty vehicle efficiency standards.”

This explains why politicians like Sanders and Warren support reinstating the export ban.

A Flawed Analysis

Although I would acknowledge that the calculations in the report are detailed, I would disagree that certain basic assumptions are sound. As a result, I don’t think the outcome would provide the expected emissions savings, and there would certainly be consequences the authors do not discuss.

The authors do admit:

“The ultimate impact of a reinstated export ban could be smaller than the values presented here, for example, if OPEC responds to the ban by increasing oil production to keep global supply constant, or if U.S. refineries are more able to adapt and their response is better described by a smaller discount.”

Related: Oil Bankruptcies Are Reaching Worrying Levels

While the paper doesn’t attempt to quantify how much smaller the ultimate impact may be, let’s consider the likely outcome.

OPEC’s initial response to the growing volumes of U.S. crude exports was to declare an ill-advised price war to bankrupt shale oil companies. That would, incidentally, be one possible outcome of banning crude oil exports. If the oil price crashed it would push some shale oil producers into bankruptcy.

We Already Know How OPEC Would Respond

Two years after oil prices collapsed, OPEC figured out that shale oil producers could survive longer than they expected. They then changed tactics and have been reducing production since then. In cooperation with Russia — one of the world’s three biggest oil producers — OPEC has been restricting production for more than three years. Currently, these production cuts amount to 1.7 million BPD.

There is absolutely no question that if U.S. exports were taken off the market, OPEC and Russia (who cumulatively produce 54% of the world’s oil) would step back into that void. This would amount to a tremendous win for them. They probably have the spare capacity to make up for 100% of lost U.S. exports, but if they didn’t it could be an even better deal for them. Remember where oil prices were before the shale oil boom? OPEC would love a return to $100/bbl oil, which once contributed about $400 billion a year to the U.S. trade deficit.

I would further point out that environmental rules in the U.S. are much more stringent than they are in Russia or in most OPEC countries. So an added disadvantage of reinstating the ban is that it will empower countries that produce oil in a less responsible manner — with respect to people and the environment — than we do here in the U.S.

So the basic premise here is that banning U.S. exports would hurt the U.S. oil industry and cause oil production to fall, while strengthening OPEC and Russia significantly on the world stage. Because of the spare capacity they currently have, there may be no emission reductions at all, except for perhaps as a result of a small amount of demand destruction as oil prices race back to $100/bbl.

This reminds me of the efforts to prevent the Keystone Pipeline from expanding. The oil was already getting to market by rail, but protesters assumed that shutting down the pipeline would shut down the oil. Meanwhile, President Obama’s State Department estimated that about six more people a year would die due to increased rail traffic without the pipeline. That inconvenient piece of analysis was consistently ignored by those protesting the pipeline. In other words, the protesters held onto expectations of a fanciful outcome while ignoring the potential for unintended consequences.

These sorts of proposals are often short-sighted. They fail to consider all of the implications, while exaggerating the benefits. In this case, the proposal would hurt the U.S. economy, strengthen OPEC and Russia, and have minimal impact on global carbon dioxide emissions.

By Robert Rapier

More Top Reads From Oilprice.com:

Download The Free Oilprice App Today


Back to homepage

<!–

Trending Discussions

–>

Related posts

Let’s block ads! (Why?)

728x90x4

Source link

Business

Japan’s SoftBank returns to profit after gains at Vision Fund and other investments

Published

 on

 

TOKYO (AP) — Japanese technology group SoftBank swung back to profitability in the July-September quarter, boosted by positive results in its Vision Fund investments.

Tokyo-based SoftBank Group Corp. reported Tuesday a fiscal second quarter profit of nearly 1.18 trillion yen ($7.7 billion), compared with a 931 billion yen loss in the year-earlier period.

Quarterly sales edged up about 6% to nearly 1.77 trillion yen ($11.5 billion).

SoftBank credited income from royalties and licensing related to its holdings in Arm, a computer chip-designing company, whose business spans smartphones, data centers, networking equipment, automotive, consumer electronic devices, and AI applications.

The results were also helped by the absence of losses related to SoftBank’s investment in office-space sharing venture WeWork, which hit the previous fiscal year.

WeWork, which filed for Chapter 11 bankruptcy protection in 2023, emerged from Chapter 11 in June.

SoftBank has benefitted in recent months from rising share prices in some investment, such as U.S.-based e-commerce company Coupang, Chinese mobility provider DiDi Global and Bytedance, the Chinese developer of TikTok.

SoftBank’s financial results tend to swing wildly, partly because of its sprawling investment portfolio that includes search engine Yahoo, Chinese retailer Alibaba, and artificial intelligence company Nvidia.

SoftBank makes investments in a variety of companies that it groups together in a series of Vision Funds.

The company’s founder, Masayoshi Son, is a pioneer in technology investment in Japan. SoftBank Group does not give earnings forecasts.

___

Yuri Kageyama is on X:

The Canadian Press. All rights reserved.

Source link

Continue Reading

Business

Trump campaign promises unlikely to harm entrepreneurship: Shopify CFO

Published

 on

 

Shopify Inc. executives brushed off concerns that incoming U.S. President Donald Trump will be a major detriment to many of the company’s merchants.

“There’s nothing in what we’ve heard from Trump, nor would there have been anything from (Democratic candidate) Kamala (Harris), which we think impacts the overall state of new business formation and entrepreneurship,” Shopify’s chief financial officer Jeff Hoffmeister told analysts on a call Tuesday.

“We still feel really good about all the merchants out there, all the entrepreneurs that want to start new businesses and that’s obviously not going to change with the administration.”

Hoffmeister’s comments come a week after Trump, a Republican businessman, trounced Harris in an election that will soon return him to the Oval Office.

On the campaign trail, he threatened to impose tariffs of 60 per cent on imports from China and roughly 10 per cent to 20 per cent on goods from all other countries.

If the president-elect makes good on the promise, many worry the cost of operating will soar for companies, including customers of Shopify, which sells e-commerce software to small businesses but also brands as big as Kylie Cosmetics and Victoria’s Secret.

These merchants may feel they have no choice but to pass on the increases to customers, perhaps sparking more inflation.

If Trump’s tariffs do come to fruition, Shopify’s president Harley Finkelstein pointed out China is “not a huge area” for Shopify.

However, “we can’t anticipate what every presidential administration is going to do,” he cautioned.

He likened the uncertainty facing the business community to the COVID-19 pandemic where Shopify had to help companies migrate online.

“Our job is no matter what comes the way of our merchants, we provide them with tools and service and support for them to navigate it really well,” he said.

Finkelstein was questioned about the forthcoming U.S. leadership change on a call meant to delve into Shopify’s latest earnings, which sent shares soaring 27 per cent to $158.63 shortly after Tuesday’s market open.

The Ottawa-based company, which keeps its books in U.S. dollars, reported US$828 million in net income for its third quarter, up from US$718 million in the same quarter last year, as its revenue rose 26 per cent.

Revenue for the period ended Sept. 30 totalled US$2.16 billion, up from US$1.71 billion a year earlier.

Subscription solutions revenue reached US$610 million, up from US$486 million in the same quarter last year.

Merchant solutions revenue amounted to US$1.55 billion, up from US$1.23 billion.

Shopify’s net income excluding the impact of equity investments totalled US$344 million for the quarter, up from US$173 million in the same quarter last year.

Daniel Chan, a TD Cowen analyst, said the results show Shopify has a leadership position in the e-commerce world and “a continued ability to gain market share.”

In its outlook for its fourth quarter of 2024, the company said it expects revenue to grow at a mid-to-high-twenties percentage rate on a year-over-year basis.

“Q4 guidance suggests Shopify will finish the year strong, with better-than-expected revenue growth and operating margin,” Chan pointed out in a note to investors.

This report by The Canadian Press was first published Nov. 12, 2024.

Companies in this story: (TSX:SHOP)

The Canadian Press. All rights reserved.

Source link

Continue Reading

Business

RioCan cuts nearly 10 per cent staff in efficiency push as condo market slows

Published

 on

 

TORONTO – RioCan Real Estate Investment Trust says it has cut almost 10 per cent of its staff as it deals with a slowdown in the condo market and overall pushes for greater efficiency.

The company says the cuts, which amount to around 60 employees based on its last annual filing, will mean about $9 million in restructuring charges and should translate to about $8 million in annualized cash savings.

The job cuts come as RioCan and others scale back condo development plans as the market softens, but chief executive Jonathan Gitlin says the reductions were from a companywide efficiency effort.

RioCan says it doesn’t plan to start any new construction of mixed-use properties this year and well into 2025 as it adjusts to the shifting market demand.

The company reported a net income of $96.9 million in the third quarter, up from a loss of $73.5 million last year, as it saw a $159 million boost from a favourable change in the fair value of investment properties.

RioCan reported what it says is a record-breaking 97.8 per cent occupancy rate in the quarter including retail committed occupancy of 98.6 per cent.

This report by The Canadian Press was first published Nov. 12, 2024.

Companies in this story: (TSX:REI.UN)

The Canadian Press. All rights reserved.

Source link

Continue Reading

Trending