Shale Boom Would ‘Retreat’ with Oil Price Drop, Breitling CEO says (

Lifting the ban on most exports of U.S. crude oil would help the domestic oil and natural gas industry, but it would not solve everything, according to an industry executive speaking at the U.S. Energy Association’s annual Energy Supply Forum in Washington, D.C.

“Do I think we should lift the Lower 48 crude oil export ban?” Breitling Energy Corp. CEO, President and Chairman Chris Faulkner asked at the Oct. 2 event. “Absolutely. I think there are markets in the world that would pay higher prices for oil.

“Will it fix supply and demand fundamentals? No,” he continued. “Will it fix other countries bringing on tremendous amounts of supply to the market? Probably not. But I think it allows producers in this country to have options, especially when you have refiners pushing back and [producers are] having to deduct $12 and such for an LLS glut,” referring to the Louisiana light sweet benchmark. “I think that alleviates that problem for sure.”

“I think it helps,” Faulkner said in summary. “I don’t think it changes the overall economics of oil.”

During his talk, Faulkner issued a note of warning on those economics. “If the price of oil comes down further, and natural gas remains range bound, then we’re going to be in a scenario where production in this country on both sides probably would come down,” he said. “Rigs would lay down. And a lot of this boom, if you will, will begin to retreat.”

Federal regulations are a major factor that could impact the cost of production, Faulkner said in response to a question, noting among efforts that the U.S. EPA has looked into regulations on hydraulic fracturing.

“Right at the cusp of us surpassing Saudi as the biggest oil producer in the world, and having fueled this boom now for almost a decade … we have some challenges coming up,” Faulkner said.

“Can we control the price of oil?” he asked. “No, it’s a globally traded commodity … The United States should not enter into an environment now, of all times, to add any kind of additional costs [and] regulation. We need to continue doing what we’re doing and if anything become more efficient.”

Faulkner provided a sketch of the global oil market. “You can see how we’re playing this global puzzle with Saudi and Iran, Iraq, Libya, because all those countries — and all those OPEC members — are fighting amongst themselves now,” he said.

“Saudi has always said they want a $100 Brent crude price,” he continued. “Russia needs $114. Iraq needs $148. Iran needs $152. All those are far north of where the Brent crude price is today. However, Saudi has always been the elastic producer of the world: They can turn on oil, they can turn off oil. But the reality is they are producing at almost an all-time low — now at 9.4 million barrels — and they said they’re not going to continue to cut production. They’re going to force Iran or Iraq or Libya to cut production, but those countries feel ‘we don’t need to cut production because we’re in a situation where we’re being sanctioned, or Iraq is again under another war.'”

Kurdistan and Russian production could add more oil to the marketplace, Faulkner said.

U.S. oil production gives the country energy security, he said. “If what’s happening in the Middle East, and all these things happening with Iraq and ISIS and … the volatility in Israel and Palestine — all those things would have pushed oil north of $150 if it wasn’t for what is happening in the United States,” he said. “Gasoline prices would be through the roof, oil would be at an all-time high.”

“Keep in mind,” Faulkner added, “two years ago just the sheer story that the media put out that Iran may close the Strait of Hormuz caused oil to skyrocket, and that was just fear. These [current events] are happening, real events around the world, and the price of oil is coming down — not up — and that’s because of what’s happening in America.”

A recent report from the Brookings Institution supported of the U.S. crude oil export ban.

Article Author: Sean Sullivan

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