Refiner Phillips 66 Would Support US Crude Oil Exports
U.S.-based refiner Phillips 66 said Thursday it would support exports of crude oil from the United States, arguing the boost they would give the country's economy would trump the higher costs for the company and for American consumers.
The share price of the second largest U.S. refiner has soared by 5% since it was spun off by oil major ConocoPhillips in May, partly because of the boom in North American energy production.
Restrictive export rules, more production, and pipeline bottlenecks have created a glut of lower-priced crude oil in the U.S. Midwest. Refiners, including Phillips 66, have taken advantage by moving this crude to their plants by rail, barge and truck.
"When you think about what is good for U.S. economy, what drives job growth... all of these are reasons why we support crude oil exports," Phillips 66 CEO Greg Garland told reporters at a lunch in New York.
"If we're allowed to export refined products I think others should be allowed to export the crude they produce."
Garland joins a growing movement in the energy industry that seeks to increase energy exports from the United States, though he is the first head of a major refiner to speak openly in favor of the issue.
Exports of crude oil from the United States are generally restricted, though some firms have started moving crude to Canadian refineries and then re-import the products like gasoline and diesel. The United States is a net importer of Canadian crude, taking around 2 million barrels per day (bpd).
The United States in the past three years has become a major exporter of gasoline, jet fuel, and diesel as domestic demand has fallen in reaction to higher prices and a slow economic recovery.
Some say the decades old ban on crude oil exports is outdated should North America become energy independent in the coming years, though it is likely to be a fiercely fought political issue.
A U.S. government-sponsored report endorsed the expansion of liquefied natural gas exports last week saying it would help the overall economy, despite likely raising energy prices for consumers.
That report met with resistance from several large industrial firms, including Dow Chemical, which has been expanding U.S. operations in hopes of using cheap energy supplies. U.S. natural gas prices are far currently less than a third of those in Asia due to the shale gas boom.
Garland acknowledged the benefit U.S. manufacturers enjoy from lower natural gas and oil prices brought about by the boom in horizontal drilling and hydraulic fracturing - commonly referred to as "fracking".
While he praised this cheap energy-led "renaissance" in American manufacturing, he supports exporting crude.
"We consider ourselves a manufacturing company... Last year the biggest export from the United States was not planes or automobiles but refined products - and that's the first time since the 1940s," Garland said.
Prices for gasoline and diesel in the United States are still largely priced off of crude imports from overseas, despite a sharp fall in prices of U.S. benchmark grades.
International marker Brent crude oil, which is the primary influence on U.S. gasoline and diesel prices, traded around $108 a barrel on Thursday compared to $86 a barrel for the main U.S. oil future, which is delivered into tank farms in Cushing, Oklahoma.
North American energy boom
Garland said that U.S. sea-borne crude oil imports could be as low as 2 million barrels per day (bpd) within five years. The drop in sea-borne imports, from a peak above 8 million bpd in the middle of the last decade, has led many to speculate the U.S. could eventually become a net exporter of crude.
Historically pipelines carried imported crude from the Gulf Coast to refineries in the Midwest, but booming production from Canadian tar sands and the Bakken shale oil fields in North Dakota and Montana has left the central United States awash with crude.
Phillips 66 has used thousands of rail cars and barges to move lower-priced crude from the Midwest to its coastal refineries, allowing it to lock in larger margins.
For example, Phillips 66 is running about 20,000 barrels per day of oil from North Dakota's Bakken shale and other cut-price crudes at Ferndale, Washington, plant and aims to double that when a new offloading facility is built, Larry Ziemba, executive vice president of refining, project development and procurement, told investors on Thursday.
Phillips 66 announced plans for a master limited partnership (MLP) on Thursday and said it would raise capital spending by 6% to $3.7 billion next year.