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(Wall Street Journal) For struggling U.S. oil producers, Congress’ plan to lift the ban on most crude-oil exports is too little, too late.
When shale output was booming between 2010 and 2014, the price of crude in the U.S. averaged $10.26 a barrel less than the world price because the U.S. was awash in oil.
Now that the glut has gone global, as Mideast producers pump more to boost market share, the price gap has shrunk to about $1. That is not enough to justify shipping crude from the Gulf Coast to Latin America or Europe, and so eliminates the incentive for U.S. companies to export.
In the near term, experts say, little oil is likely to be exported. U.S. companies will continue to cut costs and slash spending on new drilling as they try to preserve cash flow and stay in business.
“I don’t think that it’s going to transform anyone’s fortunes overnight,” said Tim Guinness, chief investment officer of Guinness Atkinson Asset Management Inc., which manages $300 million in energy-equity investments. “We have an excess of supply.”
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