What you don’t know you don’t know about lifting the ban on crude-oil exports
Committing our nation to commonsense energy strategies that grow jobs, boost our economy, and help us become more energy secure and independent has always been among my top priorities. And one way we can do that is by lifting our nation’s outdated ban on oil exports, which I’m working across the aisle with my colleague, Senator Lisa Murkowski, from Alaska to do through strong, complementary legislation we introduced last month. There’s been a lot of talk about what lifting America’s 1970s-era ban oil exports would really mean for our economy, our security, and our climate — so here’s a short list of what we can expect from lifting our decades-old ban on oil exports:
Lifting the ban on U.S. oil exports could lower gas prices.
We have an incredible opportunity to stabilize or lower gas prices across the nation by lifting the ban on U.S. oil exports. Since gasoline prices in the United States are based on prices set by the world market — not the price of U.S. crude in U.S. markets — the way to drive down the global price is by adding more supply to the global market that sets the price. This means that if the United States lifts the ban exporting U.S. oil, we would add to the global supply — which would keep the price of oil stable or even drive the price down. Consumers at the pump would benefit from the eventual savings reaching them through lower global gas prices driven down by an increased supply in the market.
“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.” U.S. Energy Information Administration, 2015
“Lifting the ban actually lowers gasoline prices by increasing the total amount of crude supply.” Brookings Institute, 2014
“Outright repeal of the ban on crude exports would probably lower world prices of oil and of liquid fuels produced from oil, but only slightly, and changes that left some export prohibitions in place would lower world prices even less.” Congressional Budget Office, 2014
Lifting the ban on exporting U.S. oil will enable America to exert our power abroad through soft power, rather than military force.
If we want to keep our nation secure, we need to tackle certain threats head-on before they reach our shores — and that includes making sure our nation as well as our allies are not captive to unstable or unfriendly countries that control vast quantities of energy resources. By opening up U.S. crude oil to the rest of the world, we would not only provide our allies with a more stable energy trading partner, but we would also reduce the power of countries like Russia, Venezuela, and volatile regions of the Middle East that use their energy dominance to exert influence over our nation and our allies. In fact, according to a recent Wall Street Journal op-ed by former CIA Director Leon Panetta and former Assistant to the President for National Security Affairs Stephen Hadley, 14 NATO countries depend on Russia for 15% or more of their oil — with several Central and Eastern European countries depending on Russia for more than 50% of their oil. In addition, by giving our allies abroad in Europe, Central and South America, East Asia, and Africa the option to import crude from a reliable, non-volatile source like the U.S., we would have the potential to drive down the cost of oil and gas around the world — weakening the bad actors whose economies and militaries depend on their current outsized influence over the global energy market.
“Liberalizing the crude oil export regime would advance U.S. foreign policy. It would demonstrate Washington’s commitment to free and fair trade, even in a politically sensitive sector, bolstering its negotiating position on other trade issues. It would also avoid putting Washington at odds with allies that would like to source their oil from the United States. If the United States were to become a major crude exporter, its leverage as an oil trade partner would grow significantly.” Council on Foreign Relations, 2013
“Permitting the export of crude oil will enhance U.S. global power in several ways, including: reinforcing the credibility of U.S. free and open market advocacy; allowing for the establishment of secure supply relationships between American producers and foreign consumers; increasing flexibility to export crude to others to address supply disruptions; empowering another non-OPEC nation to meet the growing energy demands from countries in Asia, as well as other rapidly developing nations; shifting oil rents to the U.S. from less reliable suppliers; and providing our own hemisphere with a competitive source of crude supply. Most importantly, allowing crude oil exports will increase revenues to domestic producers helping to maximize the scope of the production boom, boosting American economic power that undergirds U.S. national power and global influence.” Brookings Institute, 2014
Lifting the ban on U.S. oil exports would reduce unemployment, grow U.S. economy and GDP.
Oil rigs across the country have been hit hard by the declining price of crude oil that started last fall — in North Dakota, less than half the rigs that were operating at this point last year are in operation today, and thousands of Americans across the country have lost their jobs or had their hours reduced. But we can change that. By leveling the playing field for U.S. producers in the global marketplace, we can increase drilling and production — not only putting Americans back to work, but increasing good-paying jobs by tens of thousands if not more. More and better paying jobs would mean increased state and federal revenues, which are often invested in infrastructure, schools, hospitals, and other critical needs — and more production would mean tens of billions of additional investments in the United States. And according to the Congressional Budget Office, opening up U.S. crude exports would mean closing the trade deficit by $20 billion in 2020. We can create more good-paying American jobs, grow our economy, and help close our trade deficit — and we can do it by lifting the ban on U.S. crude oil exports.
“The increase in GDP resulting from shale development has increased federal tax revenues, and it will continue to do so. That increase will be slightly larger than the GDP increase in percentage terms, CBO expects. Specifically, CBO estimates that federal tax revenues will be about three-quarters of 1 percent (or about $35 billion) higher in 2020 and about 1 percent higher in 2040 than they would have been without shale development.” Congressional Budget Office, 2014
“Lifting the ban on crude oil exports from the United States will boost U.S. economic growth, wages, employment, trade and overall welfare. … Lifting the ban entirely by 2015, reduces unemployment at an average annual reduction of 200,000 from 2015–2020. … Employment impacts are economy wide rather than solely oil industry specific or necessarily new jobs. Rather, as the welfare benefits from lifting the ban ripple through the economy, there will be a host of people flocking to new employment opportunities. Delays in lifting the ban or partial relief (such as condensate alone) reduce employment benefits significantly. A partial lifting of the ban for condensates decreases the employment gains by nearly half in the reference case. Furthermore, in the reference case, delaying action until 2020 decreases unemployment to less than 50,000 on average from 2015–2020.” Brookings Institute, 2014
Lifting the ban on U.S. oil exports would not directly translate to increased greenhouse gas emissions.
When it comes to energy production, global supply-and-demand is and always will be the name of the game. Oil will be drilled in the U.S. — the question is whether we will only use it in the U.S. or if we will also export it to foreign countries. Lifting the ban on U.S. oil exports is about leveling the playing field for U.S. crude oil producers so they can compete with other global producers and obtain the best price available for their commodity — not about forcing the world to rely on fossil fuels to the detriment of other alternative fuels sources. And with many factors contributing to slowed or static demand, U.S. producers hoping to compete in the global market would look to displace crude oil from other countries that have higher production costs, not to further depress the world price. As we have more energy sources available, more options for our global supply of oil exports isn’t going to be the factor that changes this increased demand.
“On the environmental concern, Summers explained that “there is no environmental argument for a policy that distinguishes between oil produced in the United States for domestic consumption and oil produced in the United States for foreign consumption.” The question of regulation of fracking is a different concern than the prohibition on exports, he said.” Brookings Institute, 2014
“Many policymakers will certainly be taking environmental concerns into consideration. While these concerns are not within the scope of this report, we do not underestimate their importance. We do believe that it is difficult to quantify them unless we know where the oil will be processed (either domestically or internationally) and the particular configuration of each refinery in terms of its emissions profile. The environmental consequences are highly complex and while currently the data is unavailable, we do agree these issues need to be recognized, though the impact on global emissions (in comparison to U.S. coal exports) is likely to be negligible.” Brookings Institute, 2014
Lifting the ban on U.S. oil exports would improve the efficiency of global refinery operations, reducing oil and gas prices.
Lifting the ban on oil exports would open the U.S. to refinery markets abroad, increasing global competition and efficiency — lowering the cost of refining crude. By giving U.S. producers more sourcing options for refining a wider variety of crudes, American refineries would likely become more efficient, having to upgrade outdated systems as old as the ban on crude oil exports — to become more cost-effective. In the short term, American refiners currently set up to process light, sweet crude would have an immediate edge with U.S. oil producers, as additional shipping costs would likely increase the price of refining oil abroad.
The Energy Information Administration (EIA) studied three different scenarios for varying levels of increased crude oil production under restricted and unrestricted scenarios — in all three cases ‘increasing domestic crude oil production leads to a decline in crude imports, an increase in refinery runs, new investments to expand refinery capacity, and higher crude and refined petroleum product exports”. This includes a scenario with high production and unrestricted imports. In no scenario are U.S. refiners found to process less crude then they are currently processing. Energy Information Administration, 2015
“Some refiners are benefitting from the bottlenecked supplies because they can process the discounted light crude and sell refined products — gasoline primarily — that generally have prices tied to world markets. They oppose lifting the ban.” Resources for the Future, 2014