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EIA Report: Oil Imports Decline Under Exports Scenario

This week, the U.S. Energy Information Administration (EIA) published a report examining the Implications of Increasing Light Tight Oil Production for U.S. Refining. This is the fourth in a series of EIA-commissioned studies evaluating the impact of repealing the decades-old crude oil export ban on various segments of the economy. Previous studies focused on gasoline prices, technical options for refiners and crude oil imports.

In this latest study, EIA uses a low (3.5m bbl/d) and high (7.2m bbl/d) production scenario and models how refiners would utilize those barrels in a crude oil export restricted (crude oil export ban remains in place) and unrestricted (export ban is repealed) environment.

Importantly, EIA notes that this analysis did not consider “how possible feedback from crude export policies on domestic crude oil prices could, in turn, potentially affect domestic crude production levels.” In other words, this analysis does not consider how the price of crude oil would impact production levels, which is a key economic consideration when allocating capital. The reduction in rig count over the past few months is just one example of how crude prices impact production and activity.

Below are several key highlights and important context from the analysis:

  • Under both high production scenarios, crude oil imports fall by about the same amount. In the restricted exports case, imports fall by 37 percent in 2025. In the unrestricted exports case, crude oil imports fall by 36 percent. So the notion that crude oil imports would increase if the United States repealed it’s export ban is not accurate.
  • According to this analysis, the Brent (international benchmark price for crude oil) – WTI (U.S. benchmark) differential averages $13.78 per barrel under the restricted scenario and $6.64 under the unrestricted scenario between 2015-2025. It is important to understand that these discounts (below global market prices) are what make the refinery investments outlined in this study possible, yet the analysis does not reflect the impact these discounts would have on production. Simply put, the steep crude price discount required for refiners to run light crude will hurt domestic supply investment and production and will reduce U.S. economic growth and job creation.
  • Under the restricted export scenario, refined petroleum product (i.e. gasoline, diesel, home heating oil, etc.) exports increase by 3.4m bbl/d in 2025, however the analysis does not take into account the global oversupply of gasoline and the fact that developing countries have built refining capacity, which they will undoubtedly utilize. This demonstrates that there is a greater demand for U.S. crude oil than U.S. refined products.

Previous studies from EIA as well as other government agencies, independent experts, think tanks from across the political spectrum and academic institutions have concluded that American consumers benefit from repealing the decades-old ban on crude oil exports through a reduction and stabilization in gasoline prices. Additional research concludes that modernizing our energy trade policies to reflect America’s newfound oil abundance would increase GDP, reduce our trade deficit, protect and create jobs and enhance our national security. Those studies are available HERE.

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