Continental Resources, Inc. (CLR), EOG Resources Inc (EOG), Valero Energy Corporation (VLO): Will Oil Prices in America Hit a Wall?

The Ripple Effect

Provided there is no action from Congress to repeal the oil export laws, then this emerging trend could have a deep impact across several sectors of the oil industry. As you can imagine, refiners would be elated to be given the keys to the gateway of American oil, because it could potentially lead to those magnificent crack spreads they enjoyed back in 2012. At the same time, domestic oil producers could find themselves in a situation very similar to what we saw in 2012 when the price of natural gas slumped because supply was outpacing demand. If Deutsche Bank’s prediction were to come true, then domestic producers could see realized oil prices drop by 20-30%. This could put the brakes on US shale drilling very fast.

America’s oil industry has fundamentally changed over the past few years, and the way that we think, regulate, and invest in it needs to change as well. It may seem counter intuitive to allow crude oil exports from the US, but in doing so we can maximize the value of our domestic resources. Since we have the ability to export gasoline but not crude, we’re not going to see a major price change at the pump if we keep the ban in place. As investors, we should keep a sharp eye on domestic production and what Washington decides to do with the oil export ban because it will have a profound impact on the prospects for companies across the energy value chain.

The article Will Oil Prices in America Hit a Wall? originally appeared on Fool.com and is written by Tyler Crowe.

Fool contributor Tyler Crowe has no position in any stocks mentioned. You can follow him at Fool.com under the handle TMFDirtyBird, on Google +, or on Twitter, @TylerCroweFool. The Motley Fool has no position in any of the stocks mentioned.

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