The tentative deal designed to limit Iran’s nuclear program led to a quick — though modest — decline in oil prices, raising the possibility that U.S. drivers may enjoy a prolonged break from high gasoline prices and creating an opening for Republican lawmakers to step up efforts to end a ban on exporting domestic oil.
Analysts at Washington-based ClearView Energy Partners noted that lifting economic sanctions against Iran could return as much as 1 million barrels a day to world markets, flows that have been cut off because of the economic sanctions imposed by the U.S. and other western nations.
That new flow could depress world prices by as much as $12 below the $67 per barrel predicted by the end of 2016 by the Energy Information Administration, a forecast that assumed sanctions wouldn’t be lifted.
“We don’t want to belabor the obvious: The Iran deal is bearish for crude,” ClearView said in a note to clients.
EIA Administrator Adam Sieminski in April told the Senate Energy and Natural Resources Committee that higher Iran oil exports would either depress world prices by as much as $15 a barrel next year or cause global production to slow.
The world price of oil is the key driver of U.S. gasoline prices. The national average price for unleaded regular was $2.78 a gallon on Thursday, according to data compiled by AAA.
If the EIA’s predicted average summer price of $2.67 a gallon holds true, it would be the lowest since 2009. The EIA attributed the low prices to the 41 percent decrease in the price of international benchmark Brent crude since last year.
The prospect of prolonged pressure on oil prices comes as U.S. producers seek a relaxation of the ban on most exports of domestic crude.
They have argued that without access to world markets and expected flat demand in the U.S., growth in oil production and direct and indirect industry jobs will level off or decline.
Barry Russell, president of the Independent Petroleum Association of America, said recently that the prospect of higher Iran oil exports will put U.S. producers at a “competitive disadvantage,” and that the ban should be lifted.
“As soon as Iran is permitted to export its surplus oil on the world market, why can’t we allow our own companies to do the same with their American-made surplus of crude oil?” he said.
The American Petroleum Institute also called for lifting the ban.