Goldman Sachs: Government Intervention Not Solution To Higher Oil Prices

Goldman Sachs reiterate their view that "government intervention is not the solution to higher oil prices that are required to overcome the slow supply response of producers. This instead has been driven by (1) the damage to investors caused by oil producers' capital destruction over the last seven years, now compounded by ESG allocation inefficiencies, and (2) the demand uncertainties of COVID, China and energy transition. Neither of which will likely be resolved by palliative measures such as an SPR release, or potentially counter-productive measures, such a U.S. export ban."

• "A U.S. export ban would significantly disrupt the U.S. and global oil markets, and potentially be a counterproductive tool to attempt to lower oil prices. The U.S. exports 3mn bpd of crude and domestic pipelines would not be able to reroute these volumes to U.S. refiners, which further don't have enough capacity to process this much crude. This would leave excess U.S. crude supply quickly reaching tank tops and forcing shut-in production, with investment and production soon to enter significant declines. At the same time, the global market would be deprived of 3mn bpd of U.S. supply (light sweet crude that is Brent like in quality). Brent prices would therefore need to spike to push demand lower as there is simply not enough spare capacity (nor suitable crude) to replace U.S. lost exports. Finally, with the U.S. an importer of gasoline from Europe, U.S. gasoline prices would spike to curtail domestic demand, creating a negative hit to U.S. economic activity."