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Economist fears the worst for crude if export ban is not handled

Zachary Toliver | Shale Plays Media

A prominent economist warned of a “day of reckoning” for American-made petroleum if legislation continues to dodge the export ban dilemma facing the energy industry.

The Houston Chronicle reported that Rice University economist Kenneth Medlock warned of a “train wreck” of falling prices, declining oil production and idle drilling rigs before the United States lifts its long-standing ban on exporting crude. Medlock also claimed that political action probably will lag behind the potential effects.

I don’t see any movement or legislative action to lift the ban probably until the next administration is in office,” he said during a panel discussion. “And the problem with that is that is when the train wrecks.”

It’s no secret that production is outpacing infrastructure. Companies are doing their best to build new pipelines, refineries and storage units. But regulations, such as environmental impact analysis and zoning rights, are holding back the speed of new construction.

This near overflow of crude supply is dropping prices. As reported earlier, Permian oil is selling below the benchmark average for crude. Medlock said without changes in U.S. export policy, the price disconnects between light, sweet U.S. crude oil and Brent could hit $30. Low expected revenue from oil and gas means less enthusiasm to drill when the results are too unprofitable.

Medlock also warned of a ‘flight’ consequence from international companies to places like Mexico, where energy reforms are opening new avenues for production.

Read the full story from the Chronicle energy reporter Jennifer A. Dlouhy here- “’Day of reckoning’ ahead for oil export ban.”

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