Last week the Energy Information Administration issued its analysis on the impacts of lifting the ban on crude oil exports that has been in place since the 1975.
If that seems like a long time ago, that’s because it is: Captain and Tenille’s “Love Will Keep Us Together" was the year’s #1 song; “All in the Family” was the year’s #1 TV show; Chevrolet introduced the Monza 2+2; and Gary Dahl began marketing his Pet Rock, setting off a craze that made him a rich man.
Oh yeah, and President Gerald Ford signed into law the Energy Policy and Conservation Act that restricted exports of U.S. crude oil.
Times certainly have changed, but our disco-era energy policy is still out of step with the current energy realities. The shale boom is unlocking vast quantities of oil and natural gas, turning scarcity into abundance.
Since 2008, when crude oil production reached its lowest level since the 1950s, crude oil production has surged an incredible 74%, or 3.7 million barrels per day (bbl/d), through 2014. Over this period, Texas output jumped 185% to 2.1 million bbl/d while North Dakota output rose a staggering 530% to 915,000 bbl/d. If these states were countries, in 2014 they would have ranked as the 8th and 19th largest crude oil producers in the world.
However, the mismatch in the type of crude oil being pumped in increasing quantities in the United States—light sweet—and the type of crude oil most of our refineries are geared to process—heavy sour—is creating market dislocations that could jeopardize increasing production. Exports could alleviate these conditions and trigger even further domestic production.
EIA’s analysis, Effects of Removing Restrictions on U.S. Crude Oil Exports, is the latest in a series demonstrating the benefits of lifting the ban.’
For example, a report issued by the consulting firm IHS Energy in 2014 estimates that lifting the export ban could boost U.S. production, add $750 billion in investment, create nearly 1 million new jobs, and reduce the nation’s oil import bill by $67 billion per year. Moreover, the report points out that “by boosting global supplies, the elimination of the ban will result in lower global oil prices” that could save motorists 8¢ per a gallon of gasoline for a savings of $265 billion over the 2016-2030 period.
So what did EIA find? Well, it took a look three different modeling scenarios—(1) Low Oil Price; (2) High Oil and Gas Resource; and (3) Low Oil Price/High Oil and Gas Resource—and ran these both with and without the export ban in place out to 2025.
EIA notes that “The effects of eliminating restrictions on crude oil exports depend on the level of future domestic production, which itself depends on the characterization of resources and technology as well as future crude oil prices.”
Given this perfectly understandable caveat, it’s not surprising that the export ban has very little impact on the Low Oil Price scenario, about what you would expect under a prolonged period of low oil prices that could depress output in some areas of the country with or without the export ban.
In the High Resource and Low Price/High Resource scenarios, however, we see a great deal of difference as a result of lifting the export ban. By 2025, these include:
- Domestic crude oil production is 380,000 bbl/d to 470,000 bbl/d higher.
- Net crude oil imports are 600,000 bbl/d to 2.2 million bbl/d lower (which would benefit out balance of trade by tens of billions of dollars).
- The share of the U.S. crude oil supply from foreign sources declines by 3 to 11 percentage points (to 26% to 13% of total crude oil supply compared to about 45% today.)
More importantly for consumers, EIA ‘s analysis also concludes that “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 exports.”
There's a reason why both the Chamber and two major unions have called for lifting the oil export ban.
Lifting the ban improves our energy security, is good for consumers, and increased U.S. influence in world energy markets.
So what’s stopping us?