Security (OPENS) Act, which was approved by the energy
committee at the end of July (OGJ Online, July 24, 2015).
“Multiple studies have shown that lifting the export ban
will improve our economic and energy security without
harming American consumers,” Murkowski remarked in a
statement welcoming the study. “It’s time to leave the old
scarcity mindset behind and seize the opportunities provided by America’s energy resurgence.”
Higher output, bigger impact
The report applies EIA’s energy models to directly compare
cases over the next decade with and without the removal of
current restrictions on crude exports. Four baseline cases
using EIA’s National Energy Modeling System are considered
to reflect a range of outlooks for resources and technology
as well as prices, which are key drivers of crude production.
For this analysis, EIA generally assumes that all streams
with 50° gravity oil and above would be eligible for processing and export under recent BIS guidance.
The analysis finds no difference between projections with
and without current export restrictions in two analysis cases
in which projected production with current export restrictions remains below 10. 6 million b/d over the next decade.
However, in two other analysis cases where production in
2025 ranges 11. 7-13. 6 million b/d, projections without export restrictions show increased production, higher crude
exports, reduced product exports, and slightly lower gasoline prices to US consumers compared with parallel cases
that maintain current export restrictions.
The variation in projected production across the four
baseline cases used in the report reflect differences in the
characterization of oil resources and technology as well as
future crude prices. EIA notes there is a considerable spread
in projected production across these cases. The removal of
crude export restrictions does not lead to additional production in the reference and low oil price cases, where production remains at or below 10. 6 million b/d through 2025.
However, the removal of crude export restrictions leads
to additional production between 400,000-500,000 b/d by
2025 in the high oil and gas resource (HOGR) and HOGR-low price (HOGR-LP) cases that have significantly higher
baseline production based on more optimistic resource and
Gas prices could fall, not rise
Petroleum product prices in the US, including gasoline prices, would be either unchanged or slightly reduced by the
removal of current restrictions on crude exports. EIA notes
that petroleum product prices throughout the US have a
much stronger relationship to North Sea Brent prices than to
West Texas Intermediate prices.
In the HOGR and HOGR-LP high-production cases, the elimi-
nation of current restrictions on crude exports narrows the Brent-
WTI spread by raising the WTI price. As producers respond to
the higher WTI price with higher production, the global supply-
demand balance becomes looser unless increased production is
fully offset by production cuts elsewhere. The looser balance im-
plies lower Brent prices, which in turn result in slightly lower
petroleum product prices for US consumers.
Combined net exports of crude and petroleum products
from the US are generally higher in cases with higher US crude
production regardless of US crude export policies. However,
crude export policies materially affect the mix between crude
and product exports, particularly in the HOGR and HOGR-LP cases, which have high levels of production.
Crude exports tend to represent a larger share of combined
crude and product exports in cases where crude exports are
unrestricted. Also, in cases where the level of crude production increases with the removal of crude export restrictions,
total combined crude and product exports are higher than in
parallel cases with current crude export restrictions in place.
Although unrestricted exports of US crude would either leave
global crude prices unchanged or result in a small price reduction compared with parallel cases that maintain current restrictions on crude exports, other factors affecting global supply and
demand will largely determine whether global crude prices remain close to their current level, as in EIA’s low oil price case, or
rise along a path closer to the reference case trajectory.
As noted by EIA, resource and technology outcomes as well
as global price drivers will affect growth in US crude production
whether or not current US crude export policies are maintained.
‘Win-win’ for US consumers
“Today’s EIA report is a win-win for American energy con-
sumers and energy producers,” said Barry Russell, presi-
dent of the Independent Petroleum Association of America,
in a statement released subsequent to the report. “By lift-
ing the 4-decades-old ban on US crude oil exports, Ameri-
cans would see an increase in American energy production,
which would, in turn, grow our economy, create good-pay-
ing American jobs, and help lower gasoline prices for hard-
working American families.”
Russell last month urged further administrative action on
US crude exports after the Obama administration approved a
crude exchange between the US and Mexico (OGJ Online, Aug.
14, 2015). Following news of a secured agreement with Iran
that would allow Iranian oil to get traded on the world market,
Russell questioned why America wouldn’t allow its companies
to do the same with their American-made surplus of crude.
IPAA also voiced its support in May for Murkowski’s and
Heidi Heidi Heitkamp’s (D-ND) legislation seeking to lift the
ban (OGJ Online, May 13, 2015).
The American Petroleum Institute also noted that “con-
sumers could save on fuel costs if policymakers act now to
lift trade restrictions on US crude oil.”
Margo Thorning, senior vice-president and chief econo-
mist for the American Council for Capital Formation took it
a step further, stating, “It’s not only the increased economic
growth and lower gas prices that we stand to lose by keeping
this outdated energy policy in place, but our global credibil-