White House lifts 40-year ban on crude oil exports with new spending bill
At the end of last week President Obama signed a new bill into effect, lifting a ban on U.S. crude oil exports that had been in effect since the oil shortages of the 1970s. With crude oil reserves exceeding 490 million barrels, what effects will this lift on the exporting ban have on the oil industry?
The U.S. Energy Information Administration (EIA) conducted a study which determined that domestic gasoline prices could be slightly reduced by this move (though they may also remain unchanged). The study also examined how the change will affect the industry on a global level.
“Although unrestricted exports of U.S. crude oil would leave global crude prices either unchanged or falling slightly compared to parallel cases that maintain current restrictions on crude oil exports, other factors affecting global supply and demand will largely determine whether global crude prices remain close to their current level, as in EIA's Low Oil Price case, or rise along a path closer to the Reference case trajectory,” said the EIA, referencing charts offered in its study. “Global price drivers, as well as resource and technology outcomes, will affect growth in U.S. crude oil production regardless of decisions about future U.S. crude oil export policies.”
That fall in price has already come to pass—today Brent crude oil prices were listed at $36 per barrel, an 11-year low, leading some to worry that the U.S.’s massive oil reserves could flood the market and cause problems for the budgets of other oil-exporting countries. Whether this price dip is just a temporary reaction or indicative of a longer-lasting shift remains to be seen.
Meanwhile, U.S. industry insiders are already starting to offer comments on the lifting of the ban and their take on how it will change the domestic oil production industry and relations abroad.
"This is a historic day, and one that is long overdue," Dan K. Eberhart, CEO of Canary, LLC (among the largest private oil field service companies in the country) responded in a press statement. "I applaud our lawmakers for their dedication in staying the political course and finally lifting this ban. I'm eager to see the benefits unfold from this policy change."
In addition to addressing the country’s changing energy production landscape, Eberhart also spoke to the political implications of this change.
"This represents a gesture of international goodwill by our country and demonstrates our clear commitment to free and fair trade [and] puts us in a strong position to counter foreign nations' aggression toward our allies because we are now able to present ourselves as an alternate and reliable supplier of crude,” he added. “We now have the ability, at our discretion, to curtail, increase, or even put a temporary hold on our country's crude exports. This means that if we, our allies or any neutral nation are in trouble, we have a domestic energy surplus to depend on and leverage in our favor or on behalf of other nations. In terms of our security at home and that of our friends overseas, that's a game changer."
Six issues at the top of tax and finance leaders’ agenda
New Deloitte research reveals that tax leaders are under increasing pressure to add strategic value as companies accelerate business model transformation, from undergoing digital transformations to rethinking their supply chains or investing in green initiatives.
According to Phil Mills, Deloitte Global Tax & Legal Leader, to “truly deliver value to the business, the tax function needs to rethink its resourcing model and transform its technology infrastructure to create capacity and control costs”.
And the good news, according to Mills, is that tax and business leaders have more options at their disposal to achieve this.
Reflecting the insights of global tax and finance executives at global companies, Deloitte’s Tax Operations in Focus study reveals the six issues at the top of tax and finance leaders’ agenda.
Trend 1: Businesses seek more strategic counsel from tax
Companies are being pushed to develop new digital products and distribution channels and accelerate sustainable transformation and this is taking them into uncharted tax territory. Tax leaders say their teams must have the resources and skills to give deeper advisory support on digital business models (65%), supply chain restructuring (49%) and sustainability (48%) over the next two years. This means redrawing the boundaries of what tax professionals focus on, and accelerating adoption of advanced technologies and lower-cost resourcing models to meet compliance requirements and free up time.
According to Joanne Walker, Group Tax Director, BT Group PLC, "There’s still a heavy compliance load today, but the vision for the future would be that much of that falls away, and tax people become subject matter experts who help program the machine, ensure quality control, and redirect their time to advisory activity.”
Trend 2: Tipping point for resourcing models
Business partnering demands in the tax department are on the rise, but 93% of tax leaders say their department’s budget is remaining flat or falling. To ensure that the tax function can redefine itself as a strategic function at the pace that is required, leaders are choosing to move increasing amounts of compliance and reporting to a combination of shared service centers, finance departments, and outsourcing providers that have invested in best-in-class technology.
Trend 3: Digital tax administration is moving faster than expected
in addition to the rising focus of the corporate tax department partnering with their business counterparts, transformative changes to the way companies share tax information with revenue authorities is also creating an imperative to modernize operations at a faster pace. Nine in 10 (92%) respondents say that shifting revenue authority demands on digital tax administration will have a moderate or high impact on tax operations and resources over the next five years—and several heads of tax said the trend is moving faster than expected.
"It’s really stepped up in the last couple of years," says Anna Elphick, VP Tax, Unilever. "Tax authorities don't just want a faster turnaround for compliance but access into a company’s systems. It's not unreasonable to think that in a much shorter time than we expect, compliance will be about companies reviewing a return that's been drafted by the tax authorities."
Trend 4: Data simplification and lower-cost resourcing are top priorities
Tax leaders said that simplifying data management (53%) and moving to lower-cost resourcing models (51%) must be prioritized if tax is to become more proactive at delivering strategic insights to the business. Many tax teams are ensuring that they have a seat at the table as ERP systems are overhauled, which is paying dividends: 56% of those that have introduced NextGen ERP systems are now highly effective at supporting the business with scenario-modeling insights. Only 35% of those with moderate to low use of NextGen ERP systems said the same.
At Stryker, “we automated the source P&L process for transfer pricing which took a huge burden off of the divisions," says David Furgason, Vice President Tax. "Then we created a transfer price database to deposit and retrieve data so we have limited impact on the divisions. We are moving to a single ERP platform which will help us make take the next step with robotics.”
Trend 5: Skillsets are shifting
Embedding a new data infrastructure and redesigning processes are critical for the future tax vision. Tax leaders are aligned — data skills (45%) and technology process experience (43%) are ‘must have’ skills in a tax department of the future, but more traditional tax specialist knowledge also remains key (40%). The trick to success will be in tax leaders facilitating the way these professionals, with their different backgrounds, can work together collectively to unlock lasting value.
Take Infineon Technologies, which formed a VAT technology and governance group "that has the right knowledge about how to change the system to ensure it generates the right reports", according to Matthias Schubert, Global Head of Tax. "Involving them early was key as we took a greenfield approach, so we could think about what the optimal processes would look like and how more intelligent systems could make an impact
Trend 6: 2020 brought productivity improvements
Improved productivity (50%) and accelerating shifts to remote working (48%) were cited as the biggest operational benefits to emerge from COVID-19-driven disruption. But, as 78% of leaders now plan to embed either hybrid or fully remote models in the tax function long term, 34% say maintaining productivity benefits is a top concern. And, as leaders think about building their talent pipeline and strengthening advisory skill sets, 47% say they must prioritize new approaches to talent recognition and career development over the next two years, while 36% say new processes for involving tax in business strategy decisions must be established.