NEW YORK TIMES

December 13, 2013

[Export restrictions] deserve some new analysis and examination in the context of what is now an energy world that is no longer like the 1970sEnergy Secretary Ernest Moniz


USA TODAY

March 2014

An energy independent and net exporter of energy as a nation has the potential to change the security environment around the world – notably in Europe and in the Middle EastGeneral Martin Dempsey, Chairman of the Joint Chiefs of Staff


Gasoline costs are tied to a global market; additional crude oil exports could help increase supplies, put downward pressure on the prices at the pump and create more jobs right here at home. Access to customers abroad could drive significant new investment in U.S. production, helping to strengthen our energy security. Now that the U.S. is poised to become the world’s largest oil producer, the economic case for exports is clear.

Harnessing the benefits of America’s energy revolution will require lawmakers and regulators to reexamine policies that were enacted long before the U.S. transitioned from a period of energy scarcity to our current position: one of energy abundance. of energy abundance. America has steadily increased its crude oil production over the past decade, and in 2015, the country is projected to produce over 85 percent more crude oil than it did in 2008. The United States is currently the world’s largest oil producer, including crude oil as well as liquids separated from natural gas according to Bank of America Corp.

As we grow as an exporter, U.S. energy leadership has the potential to bolster America’s allies, expand our geopolitical influence, and strengthen the global energy market against future disruptions.

This is a new era for American energy, but our energy trade policies are stuck in the 1970s. The U.S. and China are the only major oil producers in the world that don’t export a significant amount of crude. It’s time to let free trade unlock more of the benefits of our energy abundance for U.S. consumers and further strengthen our position as a global energy superpower. The first step is lifting our own self-imposed crude export restrictions. We also must work holistically to modernize America’s energy infrastructure and facilitate the efficient flow of resources from producer, to refiner and to customer.

Exhibit 1-7: U.S. Crude Oil Production will be Higher if Exports are Allowed

[Production Changes Due to Exports (MMBPD)]

High-Differential Scenario
Low-Differential Scenario

Sources: EnSys WORLD Model and ICF Analysis.


U.S. refineries are mostly designed to process heavy (rather than light) crudes. Essentially, all current and projected increases in U.S. crude production have been in light sweet crude, meaning that the U.S. has much to gain by exporting this light crude.

The result, according to an IHS study, is that the U.S. is nearing the point where rapid production growth of light sweet crude exceeds the ability of our refining system to economically process it. Thus, exporting light sweet crudes and importing heavier crudes better aligns existing refinery configurations with crude type.

Additionally, it often makes sense to export a surplus of expensive, light oil from one region and import cheaper, heavy oil in another – rather than ship more expensive oil cross-country. This is especially true in the absence of sufficient infrastructure to efficiently transport crude to the refineries that could use it. But export restrictions effectively isolate consumers from the positive benefits of free and efficient markets.

Exporting crude is not expected to significantly impact net imports of crude. Total net crude imports are projected to continue to trend downward and be between 4.5 million and 4.8 million barrels per day (bpd) by 2035 with or without restrictions.

Current policy allows some crude exports, mainly to Canada. Even with existing restrictions, exports are anticipated to increase to approximately 580,000 bpd. According to projections in an ICF International/EnSys Energy study, gross U.S. crude oil exports are expected to reach approximately 1.8 million bpd by 2017 if export restrictions are lifted. Therefore, lifting export restrictions is anticipated to increase U.S. crude exports by over 1.2 million bpd. Meanwhile, the U.S. is expected to import a similar amount of medium and heavy crudes over the same time period, essentially swapping the light crude for heavy, resulting in a net financial gain for the U.S.

It’s often argued that the United States shouldn’t be an oil exporter as long as it’s an oil importer. This ignores history and also the fundamentals of free trade.

For nearly a century the U.S. was both an exporter and importer of crude oil. Exporting domestically produced crude made the U.S. an important participant in the global crude oil market, which sets crude prices. This ended in the 1970s when, in response to the 1973 oil embargo, Congress imposed a ban on domestic oil exports. This is the historical context for today’s exports discussion. Allowing the export of domestic oil would restore the United States to the marketplace, where it played a major role for decades.

The fact is the U.S. is both an importer and exporter of a number of commodities. From an economics standpoint, the U.S. would be in a stronger position if domestically produced crude could reach the world marketplace as other goods do every day – to the benefit of U.S. producers and consumers.

A report from federal auditors at the Government Accountability Office (GAO) affirmed that removing export barriers could spur additional U.S. production, growing the American economy while reducing global crude oil prices, which the U.S. Energy Information Administration (EIA) confirmed are “more important” than domestic crude prices in determining prices at U.S. filling stations. In short, the best way to harness the rewards of America’s energy revolution would be to ensure that crude oil producers have access to healthy markets.

The alternative is a kind of energy isolationism, the shutting-in of domestic production from global markets, depressing prices for that output and eventually discouraging new production. This works against U.S. competitiveness. As a global energy superpower, the United States should be competing with other suppliers in the global marketplace, not sanctioning itself while the benefits of exports accrue to others.

Weighted Average U.S. Product Price (2011$/gal)

High-Differential Scenario
Low-Differential Scenario



Price Decreases Due to Crude Oil Exports (2011$/gal)

A temporary glut of oil in one region does not typically lower consumer costs significantly, because gasoline is eligible for trade after the oil is refined. And in the longrun, any oversupply of unrefined crude may discourage more energy production here at home. So, if U.S. crude can reach the global market, then consumers should begin to see higher global supplies, more production and consumer-level benefits.

$5.8 billion

Estimated reduced consumer fuel cost/yr 2015–2035

This is exactly what is expected from increased domestic crude production, spurred by U.S. crude exports. Domestic crude production is still projected to increase over the next several years with or without export restrictions. However, if export restrictions are lifted, U.S. crude production is expected to grow faster, by an additional 110,000 to 500,000 bpd by 2020.

The ICF/EnSys Energy report projects that increased domestic crude output and exports would lower global crude prices, resulting in lower global product prices that would put downward pressure on domestic product prices. The impact on domestic product prices of removing crude export restrictions is expected to be modest, yet the study concludes that energy consumers would be made better off. It should be noted that many factors influence refined product prices, including local retail supply and demand, as well as federal and state excise taxes, among others.

Another expected consumer benefit from increased domestic crude production and exports is the stabilizing effect that U.S. crude would have on the global market. Additional supply from the U.S. could help diversify the market, strengthening it and shielding against price spikes due to supply disruptions elsewhere in the world.

Oil Exports Would Put Downward Pressure on U.S. Gasoline Prices

Summary of Major Economic Studies Estimated Decline in U.S. Price per Gallon of Motor Fuels
Resources for the Future 1.7 to 4.5 cents
IHS 8 cents average
ICF Up to 3.8 cents (2.3 cents average)
Brookings & Nera Up to 12 cents (9 cents average)
Aspen & MAPI Up to 9 cents
GAO 1.5 to 13 cents
Columbia University Up to 12 cents
CBO 5 to 10 cents
EIA 1 cent*

*Assumes non-U.S. oil suppliers partially reduce production in response


U.S. Crude Oil Export Decision: Assessing the Impact of the Export Ban and Free Trade on the U.S. Economy, (IHS, May 2014)

Lifting the 1970’s-era restrictions on U.S. crude oil exports would lead to further increases in domestic oil production, resulting in lower gasoline prices while supporting nearly 1 million additional jobs at the peak . . . It would lead to a total of $746 billion in additional investment during the study period (2016-2030) and an average of 1.2 million barrels per day (b/d) more oil production per year, the study finds. The additional crude oil supply would lower gasoline prices by an annual average of 8 cents per gallon, the study says. The combined savings for U.S. motorists during the 2016-2030 period would translate to $265 billion compared to a situation where the restrictive trade policy remains in place. The increased economic activity resulting from the rise in crude production would support an average of 394,000 additional U.S. jobs per, with highs of 811,000 additional jobs supported in 2017 and a peak of 964,000 jobs in 2018.


Navigating the U.S. Oil Export Debate (Columbia University, January 2015)

[Permitting exports] will likely decrease the price Americans pay for gasoline, diesel and other petroleum products and benefit the US economy as a whole. . . Allowing exports would make the US more resilient, not less, to supply disruptions elsewhere in the world.


Changing Crude Oil Markets: Allowing Exports Could Reduce Consumer Fuel Prices, and the Size of the Strategic Reserves Should Be Reexamined, (Government Accountability Office (GAO), October 2014)

Removing export restrictions is expected to increase the size of the economy, with implications for employment, investment, public revenue, and trade. . . [C]onsumer fuel prices, such as gasoline, diesel, and jet fuel, could decrease as a result of removing crude oil export restrictions.


Effects of Removing Restrictions on U.S. Crude Oil Exports, (Energy Information Administration (EIA), September 2015)

Petroleum product prices in the United States, including gasoline prices, would be either unchanged or slightly reduced by the removal of current restrictions on crude oil export… In the HOGR and HOGR/LP cases, the removal of crude oil export restrictions results in higher domestic crude prices, which leads to increased domestic production that adds to world crude supply and thereby reduces Brent crude prices and petroleum product prices.


Ending the Export Ban: What It Means for US Gasoline Prices, (Resources for the Future, February 2014)

Our basic finding is that the efficiency of global refinery operations would be improved a little if the ban on US exports of crude oil were to be lifted. And, accordingly, gasoline production would go up and its price in the United States would fall.

By ICF International and EnSys Energy

“The Impacts of U.S. Crude Oil Exports on Domestic Crude Production, GDP, Employment, Trade, and Consumer Costs”


Up to $5.8 billion – Estimated reduced consumer fuel costs year 2015–2035

U.S. weighted average petroleum product prices are expected to decline as much as 2.3 cents per gallon 2015–2035 when U.S. crude exports are allowed. The greatest potential annual decline is 3.8 cents per gallon in 2017. These price decreases for gasoline, heating oil and diesel could save American consumers up to $5.8 billion per year, on average, over the 2015–2035 period.


Up to $70 billon – More investment by 2020

An expansion of crude exports could result in $15–$70 billion of additional investment in U.S. exploration, development and production of crude oil between 2015 and 2020.


Up to 500,000 Barrels per day – increase in domestic crude oil production by 2020

The additional investment could result in increased U.S. oil production of between 110,000–500,000 barrels per day in 2020.


Up to $38 billion – projected GDP gain in 2020

U.S. GDP is estimated to increase by $38 billion in 2020 if expanded crude exports were allowed; an average of $15 to $27 billion annually through 2035. GDP increases are led by increases in hydrocarbon production and greater consumer product spending (due to projected lower retail prices for gasoline and other petroleum products).


Up to 300,000 potential job – gains in 2020

The U.S. economy could gain up to 300,000 additional jobs in 2020 when crude exports are allowed. Consumer products and services and hydrocarbon production sectors would see the largest gains.


$13.5 billion – Estimated government revenues increase in 2020

U.S. federal, state, and local tax receipts attributable to GDP increases from expanding crude oil exports could increase up to $13.5 billion in 2020.


$22 billion – Estimated reduction of trade deficit in 2020

Lifting crude oil export restrictions contributes to expanded U.S. exports. This could narrow the U.S. trade deficit by $22 billion in 2020 through increased international trade of U.S. crude oil.


100,000 – Barrels per day increase in refinery throughput 2015–2035

U.S. refinery throughput is expected to average 15.5 mmbpd without crude export restrictions, which is 100,000 barrels per day higher than with the restrictions. Refinery throughput is slightly higher with crude exports because refinery process bottlenecks (caused by mismatched crudes) are more effectively alleviated by the flexibility to swap crudes in the world market.

Source: http://www.api.org/news-and-media/news/newsitems/2014/mar-2014/~/media/Files/Policy/LNG-Exports/LNG-primer/API-Crude-Exports-Study-by- ICF-3-31-2014.pdf

Top 25 States


TEXAS


Estimated Employment Impact
2020


Estimated Income Contribution
2020 (in millions)


5.21

40,921


WASHINGTON, May 29, 2014—A new state-bystate analysis shows that 18 U.S. states could gain over 5,000 jobs each in 2020 from exports of U.S. crude oil — API Vice President for Regulatory and Economic Policy Kyle Isakower

“The U.S. is poised to become the world’s largest oil producer, and access to foreign customers will create economic opportunities across the country,” said Isakower. “When it comes to crude oil, the rewards of free trade are not limited to energyproducing states. New jobs, higher investment, and greater energy security from exports could benefit workers and consumers from Illinois to New York, especially in areas where consumer spending and manufacturing drive growth.”

The study, by ICF International and EnSys Energy, details the economic implications of lifting trade restrictions on exports of U.S. crude oil to global markets.

Source: The Impacts of U.S. Crude Oil Exports on Domestic Crude Production, GDP, Employment, Trade, and Consumer Costs
Supplement: State-Level Economic and Employment Impacts. May 9, 2014. Projected 2020 results taken from the High Differential Case with a 1.9 economic multiplier effect.

View print/older-browser PDF of the map

Recent studies confirm that consumers and the nation benefit from lifting the ban on crude oil exports. Both ICF and IHS have released extensive reports on the tremendous economic benefits.

Lifting the Crude Oil Export Ban: The Impact on U.S. Manufacturing, the Aspen Institute and the Manufacturers Alliance for Productivity and Innovation, Aspen / MAPI

October 2014

[E]nding the ban would not raise the price of petroleum products like gasoline but would actually put some, if modest, downward pressure on these prices. . .Lifting the ban on oil exports, which arguably could be done by executive action, is a simple and effective way to support high economic growth, better jobs for a beleaguered segment of the working population and for skilled workers and engineers, and energy self-sufficiency for the United States and its allies.


IHS

  • U.S. crude oil production would increase 1.2 million barrels per day average 2016 to 2030.
  • The U.S. economy would support an average of 394,000 more jobs on average 2016 to 2030 with a peak of 964,000 jobs in 2018.
  • Gross domestic product would rise by nearly $73 billion in 2016. The amount would increase to more than $134 billion additional GDP in 2018.
  • Total government revenues would increase by a combined $1.3 trillion from 2016 to 2030.
  • The average disposable income per household would increase by an additional $391 in 2018 as benefits from increased investment, additional jobs and lower gasoline prices are passed along to consumers.

Columbia

  • US crude oil production could increase anywhere between 0 and 1.2 million bpd on average between now and 2025.
  • Domestic gasoline prices would likely fall by 0 to 12 cents per gallon.
  • Lifting crude export restrictions would enhance U.S. credibility in current and future trade negotiations, and avoid creating a precedent that could harm future U.S. objectives.

EIA

  • Net trade balance of crude oil and petroleum products improves by up to 410,000 barrels per day.
  • Total U.S. crude oil production grows by up to 470,000 barrels per day.

Brookings / NERA

  • Lifting the ban will boost U.S. economic growth, wages, employment, trade, and overall welfare.
  • Throughout 2015 to 2039, GDP could rise by $550 billion to $1.8 trillion.
  • U.S. oil production could rise by 1.3 million to 2.9 million barrels per day in 2020.
  • Unemployment on an annual average could fall 200,000 to 400,000 from 2015 to 2020.

Aspen / MAPI

  • $165 billion increase in GDP in 2019-2021.
  • 650,000 jobs added at peak in 2019.
  • Real household income increases of $2,000 to $3,000 per household in 2025.
  • All manufacturing jobs would see an average gain of 37,000 per year through 2025, construction jobs would grow by over 217,000 in the peak year 2017, and related professional services jobs would grow by an average of 148,000 per year.
  • Capital investment for machinery—exploration and development—would increase by $7 billion in 2020.

U.S. Energy Secretary Ernest Moniz on crude export restrictions

“Those restrictions on exports were borne, as was the Department of Energy and the Strategic Petroleum Reserve, on oil disruptions. There are lots of issues in the energy space that deserve some new analysis and examination in the context of what is now an energy world that is no longer like the 1970s.”

Executive Director of the International Energy Agency Maria van der Hoeven

“Some may see this as a choice between keeping American oil within US borders for reasons of economic security and allowing the US to generate billions of dollars in new export revenues. But market realities suggest a far simpler decision ahead: either US crude is shipped abroad or it stays in the ground.”

Managing Director of Commodity Research at Citigroup Ed Morse, Reuters

“It is incontrovertible that if the U.S. exported crude the price of gasoline would be lower. And it is incontrovertible that the trading interests of the United States have become increasingly dominated by energy.”

Reuters Analyst John Kemp, Reuters

“Energy Secretary Moniz was simply stating the obvious when he noted that circumstances have changed and the controls and might deserve a review… The ban ensures domestic crude oil prices remain below world levels because producers cannot arbitrage the difference. But no such restrictions apply to refined products, so the price paid by U.S. consumers for gasoline, heating oil and diesel is linked to world levels.”

Citigroup Analyst Seth Kleinman, Financial Times

“If lower gasoline prices for the US consumer are a desired aim, the US should be exporting crude, and lowering Brent and hence global gasoline prices in the process.”

President of RBN Energy Rusty Braziel, at the Center for Strategic and International Studies

“The rules that were established to be able to handle the exports of those hydrocarbons were all established back in the shortage days. In the olden days, these laws and rules didn’t make any difference. Now in a world of exports, they do.”

Business Columnist David Nicklaus, St. Louis Post-Dispatch

“The booming U.S. energy industry is on pace to produce more oil than Saudi Arabia by next year, but it can’t sell a drop of that crude overseas. . . Disco music, wide lapels and other 1970s artifacts have been out of fashion for a long time. It’s time for that era’s energy policy to join them on the scrap heap of history.”

Columnist Robert J. Samuelson, Washington Post

“By all logic, we should be working to sustain the boom. We aren’t, and therein lies a classic example of how good policy is held hostage to bad politics and public relations. What would promote continued exploration is a lifting of the current U.S. ban on exporting crude oil. Let producers sell into the world market.”

Energy Scholar Daniel Yergin, IHS Vice Chairman

“Lifting the ban on crude exports would be a signal of U.S. commitment to global energy security. For four decades the U.S. government urged other countries’ free flow of energy but it didn’t matter that we had a ban on U.S. export of crude oil. But you know what, it matters now. … All the rationales for the export ban are gone, but the ban is still there.”

Larry Summers, Former Obama Economic Adviser

“I would suggest to you that the principle that we shouldn’t have prohibitions without a reason is a reason to permit oil exports. The economic growth consequences is a reason to permit oil exports. The environmental calculus, all things considered, points towards permitting oil exports. The geopolitics of how should the world’s largest oil producer behave speaks in favor of permitting oil exports. All four things together speak overwhelmingly in favor of permitting oil exports.”

The Wall Street Journal, Editorial, Exporting American Oil

“Opponents of exporting oil claim that lifting the ban would raise U.S. gasoline prices, but that misunderstands that oil is a global market. U.S. pump prices would continue to rise or fall with world oil prices regardless of exports. But lifting the ban would lead to more domestic production, which means more jobs in oil drilling and services and everything that goes along with such growth. . . the best protection for America’s energy supply is more domestic production that exports would induce. . . The oil export ban is an example of self-defeating resource nationalism that hurts U.S. investment and the living standards of American workers. It was a bad idea in the 1970s, and today it is merely one more obstacle to America’s energy renaissance.”

Washington Post, Editorial, The U.S.’s crude oil policy

“In the deeply interconnected global oil market, in which borders matter less than many people think, the obvious solution is to allow oil companies to ship the light crude to refineries suited for processing it, supporting U.S. profits and U.S. jobs in the process, and to tolerate imports of crude oil that U.S. refineries can handle. … The export ban was a desperate ploy in the 1970s to control commodities markets amid spikes in oil prices induced by the Organization of the Petroleum Exporting Countries. Keeping it in place now is an economically incoherent policy, particularly when removing it would encourage an industry that is transforming the fortunes of large swaths of the nation. Congress should lift the ban entirely.”

Chicago Tribune, Editorial, Lift the U.S. ban on oil exports

“Like free trade in general, selling American oil overseas would be good for our economy. It would make the oil market more efficient, encourage a build-out of the U.S. energy network and stabilize prices over time for consumers. . . That additional business would translate into job creation as the oil industry invested in refineries and transportation networks to handle the light, high-quality crude being produced domestically…The ban does nothing to keep domestic gasoline prices lower… The best outcome for U.S. consumers would be a further boom in U.S. oil production, resulting in exports that drive down global oil prices and thereby dampen fuel costs here.”

Boston Herald, Editorial, It’s Time To End Crude Oil Exports Ban

“It really is time to end the prohibition. It never made much sense except to allow politicians to argue that they had done something for American consumers… Exporting crude can preserve — even increase — jobs here and improve the U.S. balance of payments… [P]rotectionism can’t work for long and shouldn’t be tried.”

Bloomberg, Editorial, Lift the Ban on U.S. Oil Exports

“By increasing exports even as it continues importing oil, the U.S. can exercise maximum flexibility in world oil markets. It can keep U.S. oil flowing, encouraging further exploration and drilling. And it can help maintain relatively stable gasoline prices, because these are largely determined by world markets.”

Greeley Tribune, Editorial, U.S. should allow crude oil exports

“Exporting more oil and gas will create more jobs for Americans and go a long way toward balancing the trade deficit. . . It certainly makes sense to export what we don’t need domestically to stabilize the global economy by helping keep energy costs down worldwide.”

Oil and Gas Journal, Editorial, End the Export Ban

“The US should scrap its antique prohibition against the export of domestically produced crude oil. . . Opponents to crude exports will say a foreign pull on supply would raise domestic prices. They will be overlooking the vitally important influences value and location differentials exert in the modern oil market. And they will be wrong.”

  1. The Impacts of U.S. Crude Oil Exports on Domestic Crude Production, GDP, Employment, Trade, and Consumer Costs – ICF International and EnSys Energy http://bit.ly/1o0fUF3
  2. US Crude Oil Export Decision: Assessing the impact of the export ban and free trade on the US economy – IHS http://bit.ly/1pDU3WD
  3. The Impacts of U.S. Crude Oil Exports on Domestic Crude Production, GDP, Employment, Trade, and Consumer Costs Supplement: State-Level Economic and Employment Impacts – ICF International and EnSys Energy http://bit.ly/1o0ggLO
  4. Crude Behavior: How Lifting the Export Ban Reduces Gasoline Prices in the United States – Resources For the Future http://bit.ly/1o0h2Ze
  5. A Signal to The World: Renovating The Architecture Of U.S. Energy Exports – U.S. Senator Lisa Murkowski http://1.usa.gov/1o0jb78
  6. US Crude Oil Export Decision: Assessing the impact of the export ban and free trade on the US economy http://bit.ly/1iwp2h2
  7. Lift the Ban on U.S. Oil Exports, Brookings Institution http://bit.ly/1pDRMe8
  8. IHS: http://press.ihs.com/press-release/energy-power/lifting-export-restrictions-us-crude-oil-would-lower-gasolineprices- an-0
  9. ICF: http://www.api.org/news-and-media/news/newsitems/2014/mar-2014/study-crude-exports-an-economic-win-forus- consumers-workers
  10. Lifting The Crude Oil Export Ban: The Impact on U.S. Manufacturing, Aspen Institute http://bit.ly/1vLyOSh
  11. Changing Markets Economic Opportunities from Lifting the U.S. Ban on Crude Oil Exports, Brookings Energy Security Initiative http://bit.ly/1vLzur1
  12. What Drives U.S. Gasoline Prices?, U.S. Energy Information Administration http://1.usa.gov/1pnLTVb
  13. Changing Crude Oil Markets: Allowing Exports Could Reduce Consumer Fuel Prices, and the Size of the Strategic Reserves Should Be Reexamined http://1.usa.gov/1pnM6I8
  14. Navigating the U.S. Oil Export Debate – Columbia | SIPA http://energypolicy.columbia.edu/sites/default/files/energy/Navigating%20the%20US%20Oil%20Export%20Debate_January%202015.pdf