US Congress has approved a deal to lift the 40-year-old ban on US crude export to allow domestic oil producers sell their products in the global market without restrictions, Reuters reported.
The provision is to expire at the end of 2021, and it is valued at $1.9b in total over the next ten years, according to an analysis published by the Joint Committee on Taxation, cited by Bloomberg.
The Reuters report said that immediate prospects for US oil export were limited as US refineries had increased the processing of crude. Nonetheless, a surge in domestic output is to further reduce US reliance on imported oil.
The export ban lifting came after a decade of agitation by US major oil explorers such as Exxon Mobil Corp and Continental Resources Inc. Their technological advances in drilling and fracking have opened up untapped reserves of crude, making the country the world’s third-biggest producer.
The current provision is likely to unleash a flood of oil from US shale fields and intensify competition for market share, adding pressure to oil prices that have tumbled 67% in the past 18 months, Bloomberg wrote.
However, according to the Moody’s Investors Service, the US oil industry is expected to continue limping throughout 2017 as weak cash flow has paused the drilling.
In another report, Bloomberg explained that the legal provision would allow independent refiners to exclude 75% of oil-transportation costs from their pre-tax net income. Some refiners processing crude into gasoline and diesel will get a tax break worth $119m in 2016 on the cost of oil shipment.
The White House announced its support for the export lifting despite initial objections, Bloomberg reported.