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, according to a comprehensive new study by IHS (NYSE: IHS), the leading global source of critical information and insight.
Doing away with exports restrictions would also benefit U.S. household income, gross domestic product (GDP) and government revenues, the study says. The resulting increase in domestic oil production would be so great that it would cut the U.S. oil import bill by an average of $67 billion per year.
The study, titled U.S. Crude Oil Export Decision: Assessing the Impact of the Export Ban and Free Trade on the U.S. Economy says that making U.S. oil available to global markets would unlock the current supply and refining gridlock in the United States. 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.
The study finds that the growth in economic benefits would be rapid, with many of the economic impacts reaching peak levels in the next few years before maintaining elevated levels throughout the remainder of the study period. This is due to an immediate surge in investment that would result from pent up potential to be unlocked if crude exports were permitted. However, as a result of the increase in overall oil supply, the annual reductions in the price of gasoline remain largely consistent throughout.
If exports restrictions were removed, the resulting increase in domestic oil production would be to such a degree that U.S net imports of petroleum would be less than they be would under current policies, the study says.
The removal of export restrictions would lower net petroleum imports to the United States by nearly one million b/d in 2016 for a savings of more than $43 billion. The annual savings would continue to grow until peaking at a savings of nearly $87 billion (nearly 2 million b/d lower) in 2025. The savings remains significant for the remainder of the study period, averaging more than $74 billion (1.8 million b/d lower) per year during that time.
“The 1970’s-era policy restricting crude oil exports—a vestige from a price controls system that ended in 1981—is a remnant from another time,” said Daniel Yergin, IHS vice chairman and author of The Quest. “It does not reflect