Lifting US Export Restrictions Would Lower Gas Prices – IHS

May 30, 2014

the dramatic turnaround in domestic oil production, led by tight oil, which has reversed the United States’ oil position so significantly. The United States has cut its dependence on foreign oil in half since 2005 and its production gains have exceeded that of the rest of the world in recent years. The economic contributions of this turnaround have been substantial. Allowing the free trade of oil would expand those gains for consumers and the wider economy.”

If exports restrictions were lifted, the economic benefits would come by way of relieving the gridlock in light tight oil supply that currently exists in the U.S., the study says. The rapid growth in U.S. “light tight oil production”—which has already increased U.S. domestic oil output from 5 million b/d in 2008 to 8.2 million b/d in March 2014—has outpaced domestic refining capacity for that specific type of crude oil (light tight oil), thus restricting further investment in production.

“There are different types of oil and they require different kinds of refining processes and facilities,” said IHS director and study co-author James Fallon. “And as a result of the boom in tight oil production, the U.S. is exceeding its capacity to process that type of crude. Current export restrictions mean that light crude has to be sold at a sharp discount to compensate for the extra cost of refining it in facilities that were not designed for it. That gridlock is preventing additional investment and production—and the additional economic benefits—that could otherwise take place.”

The study concludes that the assumption that allowing crude oil exports would result in higher gasoline prices for consumers is not accurate. U.S. gasoline, unlike crude oil, is part of a globally-traded gasoline market, meaning that U.S. prices at the pump reflect global prices. At present, the current policy is discouraging additional crude oil supplies from being brought to market, which actually makes gasoline prices higher than they otherwise would be.

“If crude oil export restrictions were lifted, the resulting increase in oil production would increase supply and actually lower gasoline prices,” said Kurt Barrow, study co-author and IHS vice president, downstream energy. “The gasoline trade and price fundamentals are clear.”

Among the study’s other key findings, if restrictions on U.S. crude oil exports were removed:

U.S. oil production would increase, beginning with an additional 949,000 b/d in 2016. The ability to export crude would then result in more than a million barrels per day in extra production each year going forward, peaking at 1.3 million b/d of additional production in 2030.
 
U.S. crude exports would reach 665,000 b/d in 2016 and rise to more than 1.5 million b/d in 2020. Crude exports would peak at more than 1.7 million b/d in 2025 before averaging more than 1.5 million b/d for the remainder of the study period.
 
The resulting increase in crude production would support 359,000 more jobs in 2016 before peaking at 964,000 additional jobs supported in 2018. 700,000 additional jobs would be supported in 2020 with