As far as the Export Administration Act goes, the thinking is that U.S. refiners only have capacity to process so much crude. Once our supply moves past that point, the stored oil becomes a huge liability. Oil drops in value as it sits, and low oil prices will make production in certain regions prohibitively expensive. Exporting crude would keep prices high and allow production to continue.
Consider the source
No one understands how the movement of oil affects prices like the people in charge of moving that oil. The midstream industry’s entire livelihood depends on knowing where the oil is and where producers want to move it, even before the producers may know themselves. In short, Armstrong is an expert, and his words carry a certain weight as a result.
In fact, Valero Energy Corporation (NYSE:VLO) has already received special permission from the Department of Commerce to export crude to one of its facilities in Canada. The company is using the light sweet crude from the Eagle Ford shale to displace imports from West Africa.
Armstrong, again, is on record with the idea that what we think right now may change wildly in 12 months, and again 24 months beyond that. The industry is in such a state of flux that there are no guarantees. Still, it is important to think about the effects that any potential rollback or adjustment to the Jones Act and the Export Administration Act might have on our investments.
Foolish takeaway
It can be hard to catch every conference call — or any conference call, for that matter — but the transcripts are almost always available online 24 hours later, and investors should make a point of checking them out. The Q&A at the end is especially valuable for gaining insight on the larger trends that can dramatically affect our investments.
One producer that would certainly benefit from higher oil prices is the Bakken’s own Kodiak Oil & Gas Corp (USA) (NYSE:KOG). Kodiak is a dynamic growth story, but with great opportunities come great risks. Before you hitch your horse to this carriage, let us help you with your due diligence. To see if Kodiak is currently a buy or sell, check out our new premium report, which comes with a year of timely updates and analysis.
The article Are U.S. Crude Exports Just Around the Corner? originally appeared on Fool.com and is written by Aimee Duffy.
Fool contributor Aimee Duffy owns shares of Plains All American Pipeline. Click here to see her holdings and a short bio. If you have the energy, check out what she’s keeping an eye on by following her on Twitter, where she goes by @TMFDuffy.The Motley Fool has no position in any of the stocks mentioned.
Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.
