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Study: US would benefit by lifting crude-export ban

05.29.2014  | 

The US will benefit from increased oil production and lower gasoline prices if the government lifts restrictions on crude exports, according to a new study from consultancy firm IHS.

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By HEESU LEE
Bloomberg

The US will benefit from increased oil production and lower gasoline prices if the government lifts restrictions on crude exports, according to IHS.

The world’s largest oil consumer may save an average of $67 billion/year from its import bill as domestic output may rise as much as 949,000 bpd in 2016 with the removal of the export ban, the Colorado-based consultant said in a report. Such a scenario would support 964,000 additional jobs in 2018, it predicted.

“Making US oil available to global markets would unlock the current supply and refining gridlock,” IHS said. “It would lead to a total of $746 billion in additional investment during the study period of 2016 to 2030 and an average of 1.2 million barrels per day more oil production per year.”

A 1975 US federal law bans most oil exports, with only shipments of refined products such as gasoline and diesel allowed. The Merchant Marine Act of 1920, known as the Jones Act, also restricts shipments within the US to vessels that are built in the country and crewed by Americans.

Gasoline prices in the US may potentially drop by 8 cents/gal each year on average if the export ban is lifted, according to IHS. This would translate to $265 billion in savings for US motorists during the 2016 to 2030 period, it said.

“The 1970’s-era policy restricting crude oil exports -- a vestige from a price controls system that ended in 1981 -- is a remnant from another time,” said Daniel Yergin, the vice chairman at IHS. “It doesn’t reflect the dramatic turnaround in domestic oil production, led by tight oil, which has reversed the US’s oil position so significantly.”

Debate Intensifies

The mismatch between rising US oil production from shale and the country’s ability to refine it is driving the debate over whether to lift the ban on crude exports, Energy Secretary Ernest Moniz said earlier this month.

“The driver, or the consideration, is that the nature of oil we’re producing may not be well matched to our current refinery capacity,” Moniz said an industry event in Seoul. “Bakken in North Dakota and Eagle Ford in Texas shale produce very light oil that is not well-connected by infrastructure to the refineries that can process it.”

US crude inventories rose last month to the highest since the government’s Energy Information Administration began publishing weekly data in 1982. Stockpiles increased to 399.4 million bbl in the week to April 25, according to the EIA.



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Charles Scouten
05.30.2014

What a fascinating concept! Lower supply for domestic use and it will - so this new theory of supply and demand goes - lower domestic price. This is truly Nobel prize economics! Or the worst con job I've been exposed to lately.

JP
05.30.2014

API is myopic and this analysis may be correct for next few decades of profit maximization of API member companies. For US as country, this decision to export the fortunes will fund the global competition when the next energy crisis hits in next century or by end of this century, since no API members are funding the research on next generation electric vehicles. This proposition of exporting away US crude is a bad recommendation because it is not a sustainability augmenter, but it is a sustainability diminisher.

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