Lifting U.S. Crude Oil Export Ban
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. The United States government restricted the export of most domestically produced crude oil starting in 1973, a time when U.S. oil production was in decline. The U.S. and China are the only major oil producers in the world that don’t export a significant amount of crude. Oil production since 2007 has shot up more than 80% to 9.5 million barrels a day. The U.S. still imports a lot of oil, but the share of petroleum from foreign sources, 27%, is at its lowest level since 1985.
The export ban was also intended back in the era of oil scarcity to protect U.S. industry (and the jobs created with it) from the shock of OPEC’s price-making actions. However, the export ban now actually magnifies the impact of a recent OPEC supply glut designed to harm U.S. oil workers.
Current policy allows some crude exports, mainly to Canada. The U.S. is already exporting more than a half-million barrels of crude a day to Canada, the biggest exemption under the ban. That is 14 times as much as in 2007, but still just 5.2% of U.S. oil produced a day. Because of the export ban, U.S.-based refineries have been buying domestic crude at a discount compared with oil elsewhere in the world and still selling their refined products, like gasoline and diesel, at higher prices on the world market. The U.S. government doesn’t limit exports of refined petroleum products, and these exports have more than doubled since 2007.
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.
Lifting crude oil export restrictions contributes to expanded U.S. exports. This could narrow the U.S. trade deficit by $22.3 billion in 2020. U.S. weighted average petroleum product prices decline as much as 2.3 cents per gallon when U.S. crude exports are allowed. The greatest potential annual decline is up to 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. With crude exports, U.S. oil production is expected to grow faster and could result in incremental U.S. oil production of between 110,000–500,000 barrels per day in 2020. 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.
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. 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. 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
Lifting the ban would increase the global oil supply and lower global oil prices – which would lead to savings for U.S. consumers at the pump. Lifting the ban on crude oil exports would be overwhelmingly beneficial for the U.S. economy and U.S. energy and national security. Lifting that ban would not just help U.S.-based oil producers create more American jobs and revenue, but would give the U.S. considerably more non-military influence in foreign policy.