US oil exports “will not wean allies from Russian crude”

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Gazprom news

Lifting the ban on US oil exports would do little to help Eastern European countries decrease their reliance on Russian energy, a policy research arm of Congress said in a memo to US lawmakers.

Lawmakers in favor of axing the 40-year-old US crude oil ban are increasingly using the argument the move would bring stability to allies in Europe and Asia by adding a steady alternative supply to markets that currently rely heavily on Russian oil.

Several Republican US presidential candidates have also called for using crude oil exports as a strategic foreign policy weapon against Russia and Iran.

However, oil refineries in countries such as Poland and Hungary are configured to run mostly on Russian medium sour oil and would likely have to invest in costly equipment to run surplus US light sweet oil, said the memo by Congressional Research Service.

“This in turn may result in reducing the attractiveness to US producers to export crude oil to the region,” the CRS said.

The memo, sent to Congressional offices on May 29, emerged on the same day that Senator John Cornyn, the Senate’s No. 2 Republican, announced amendments to the annual defense spending bill that would allow crude and natural gas exports to allies whose security would improve if they had access to US energy. It is uncertain whether those amendments will be included in the final bill.

To the extent the United States exported a wide range of crude oils, including medium heavy oils, it could displace some Russian oil, the memo said.

Many countries in Eastern Europe, however, would need to build pipelines from ports to refineries, as well as other infrastructure to handle US crude, the CRS said.

In addition, Russia’s state-controlled companies could try to keep market share by lowering the price of crude to Eastern Europe should waves of US oil suddenly be available.

“The financial justification for delivering U.S. crude oil to Eastern Europe may or may not exist over time,” the memo said.

Bills introduced in the House of Representatives and the Senate this year to lift the oil ban have gained sponsors recently, but still face uphill battles to get enough support to pass.

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