A new study found that sending crude oil abroad would lower gas prices and boost the economy, contrary to the claims made by export opponents.
The study by ICF International concludes exporting U.S. crude oil would save consumers up to 2.3 cents per gallon on petroleum products, including on gasoline, heating oil, and diesel. This would save consumers $5.8 billion annually on petroleum products for the next 20 years.
“Allowing crude exports would reduce refinery margins due to higher domestic crude costs and slightly lower U.S. and global petroleum product prices,” the ICF study notes. “Because the volume of refined product produced is similar with and without exports, refinery employment is not projected to be significantly impacted.”
The ICF study was done on behalf of the American Petroleum Institute, the main U.S. oil lobby, which is pushing for the federal government to lift its ban on crude oil exports in the midst of a major oil and natural gas boom.
API and some lawmakers argue that allowing oil exports would boost economic growth and lower oil prices because U.S. crude would increase the global supply, driving prices downwards. Gasoline costs are tied to global markets and increasing supplies would save consumers at the pump.
“Consumers are among the first to benefit from free trade, and crude oil is no exception,” said Kyle Isakower, vice president for regulatory and economic policy at the American Petroleum Institute.
“Gasoline costs are tied to a global market, and this study shows that additional exports could help increase supplies, put downward pressure on the prices at the pump, and bring more jobs to America,” Isakower added.
The push on Capitol Hill for free trade in U.S. crude oil has been Alaska Republican Sen. Lisa Murkowski. Alaska is the country’s fourth largest oil producing state, according to government data.
Right now, U.S. oil can only be exported if it’s refined first, this gives refiners access to crude oil that is discounted because the export ban holds down domestic prices. This means refiners enjoy a nice profit margin because they pay lower prices for crude than on international markets while selling gasoline and other products at global market rates.
Only a handful of major refiners have opposed allowing crude oil exports. Led by major U.S. refiner Valero Energy, the opposition has said that keeping crude oil in the U.S. would enhance energy independence and give the country an economic advantage.
“It makes more sense to keep crude oil here in the U.S.,” said Valero spokesman Bill Day. “It has significantly reduced American dependence on foreign oil, kept U.S. refining utilization high, and insulated American consumers from geopolitical shocks.”
But the recent U.S. oil boom has led to huge production increases, mainly of light crude oil and lease condensate. But U.S. refineries are largely equipped to handle heavier crude coming from Saudi Arabia and Canada. This means that “there is a mismatch between U.S. refinery capabilities and the country’s newfound supply,” according to ICF.
So there is a mismatch between what refineries can process and the type of oil coming out of the ground in the U.S. This, along with lagging energy infrastructure development, means that there is a growing glut of U.S. crude, which is driving down prices for refiners, but doing little to help consumers of petroleum products.
“U.S. international trade in petroleum products is not subject to volume restriction for imports or exports and so U.S. product prices are set by international markets,”ICF noted. “Allowing U.S. crude exports reduces U.S. and world petroleum product prices by moderating world crude oil prices and allowing for more efficient refinery operations.”
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