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Fact Check: Senators’ Claims Don’t Match Reality on Crude Oil Exports

With momentum growing on Capitol Hill and across the country for lifting the outdated ban on crude oil exports, thirteen Senate Democrats recently wrote to President Obama urging him to leave the ban in place. Recycling familiar talking points, the Senators’ views are starkly at odds with the growing body of research from government agencies, think tanks, academia and public policy experts across the political spectrum that show how crude oil exports is a win-win for U.S. consumers and our economy.

Claim: “Repealing or weakening the crude oil export ban could harm our national security.”

  • FACT: Ending the export ban would enhance U.S. national security by providing greater stability to the global crude oil market, reducing price volatility and providing our allies with a reliable and secure supply of energy.  Experts, including former Obama Administration officials and Defense Secretaries from both political parties, agree:
    • Leon Panetta, former Secretary of Defense, and Stephen Hadley, former National Security Advisor: “The U.S. has broken free of its dependence on energy from unstable sources…But our friends and allies, particularly in Europe, do not enjoy the same degree of independence. The moment has come for the U.S. to deploy its oil and gas in support of its security interests around the world.”
    • William Cohen, former Secretary of Defense: “By allowing the U.S. to become a stable source of supply to global energy markets, counteracting supply disruptions that will inevitably affect other energy-rich regions, President Obama and Congress can double down on promoting long-term economic growth and reinforcing U.S. foreign policy leadership.”
    • Michèle Flournoy, former Under Secretary of Defense: “Crude oil export restrictions create distortions in the domestic oil market and pose a risk to U.S. oil production growth. They stifle economic growth and also hamper the ability of U.S. foreign policy and national security leaders to seize strategic benefits presented by the energy revolution. Lifting oil export restrictions will yield a variety of security dividends to the United States.”
    • Jason Bordoff, former Special Assistant to President Obama: Allowing exports would make the US more resilient, not less, to supply disruptions elsewhere in the world. Greater integration into global markets would make US oil supply more responsive to international market developments, mitigating the impact on American consumers and the US economy of production losses in other countries.”
    • Columbia University’s Center on Global Energy Policy: “Increased U.S. crude production can weaken the economic power, fiscal strength and geopolitical influence of other large oil producing countries”…[lifting export restriction allows] “for greater U.S. diplomatic leverage in future application of sanctions or pursuit of other objectives.”

Claim: “We are concerned that lifting the crude oil export ban could harm American consumers by raising U.S. energy prices.”

  • FACT: A growing consensus of public policy experts, economists and think tanks from across the political spectrum have concluded that repealing the ban on crude oil exports will put downward pressure on gasoline prices, which benefits consumers. How? Because U.S. gasoline prices are based on global oil prices. Repealing the ban would lead to greater U.S. oil production and an increase in the global oil supply, which would drive global oil prices down.
    • Energy Information Administration: “Gasoline is a globally traded commodity and, as a result, prices and changes in prices are highly correlated across global spot markets… The effect that a relaxation of current limitations on U.S. crude oil exports would have on U.S. gasoline prices would likely depend on its effect on international crude oil prices, such as Brent, rather than its effect on domestic crude prices.”
    • Columbia University: “[W]e estimate lifting current crude export restrictions could …reduce domestic gasoline prices by between 0 and 12 cents per gallon.”
    • Harvard Business School: “Instead of raising domestic prices, then, the overall effect of lifting the oil export ban could actually reduce global prices for gasoline by increasing the global availability of crude oil.”
    • IHS Energy: “Since US gasoline is priced off global gasoline prices, not domestic crude prices, the reduction will flow back into lower prices at the pump – reducing the gasoline price 8 cents a gallon. The savings for motorists is $265 billion over the 2016 – 2030 period.”
    • ICF International: Lowered prices as a result of the crude export ban “could save American consumers up to $5.8 billion per year, on average, over the 2015 – 2035 period.”
    • Congressional Budget Office: “U.S. consumers of gasoline, diesel fuel, and other oil products would probably benefit along with domestic oil producers, if the ban was repealed…”
    • Government Accountability Office: “A decrease in consumer fuel prices could occur because they tend to follow international crude oil prices rather than domestic crude oil prices, according to the studies and most of the stakeholders. If domestic crude oil exports caused international crude oil prices to decrease, consumer fuel prices could decrease as well.”
    • Brookings: “The increase in U.S. oil production makes world oil prices fall. Accordingly, so do U.S. gasoline and diesel prices, at least temporarily. This lowers the costs of production for all kinds of businesses and makes households better off.”
    • Rice University, Baker Institute for Public Policy: “Some have argued that crude oil exports would increase gasoline prices in the US. However, because refined products, such as gasoline, can be freely exported, the prices of refined  products sold in the US are in a parity relationship with international prices for refined products. Thus, the discounted prices of oil produced in the US are not reflected in US gasoline and refined product prices. Thus, removing the crude export ban, although it would raise the price of domestic crude  oil, would not increase the price of gasoline in the US.”
  • FACT: Claims that consumers are benefiting from the lower price of U.S. oil are based on a flawed analysis by Barclays Equity Research. Its analysis ignores research from the U.S. Energy Information Administration which demonstrates that the price U.S. consumers pay at the pump is tied to the international Brent crude oil benchmark, not the U.S. benchmark (WTI).  U.S. consumers are paying global prices for gasoline, and not receiving any domestic crude discount. Its analysis also makes no adjustments for seasonal outliers (i.e., harsh winter weather, unusually high/low maintenance outages) that influence underlying demand or supply, and consequently prices.  In some cases, a single month or quarter can be such a large outlier that is biases the entire year’s price level.  Finally, it uses wholesale price data (Platts) and not consumer prices.  Thus, inferences for consumer prices are indirect at best.

 Claim: “Repealing or weakening the export ban could harm U.S. businesses.”

  • FACT: There is not one piece of credible research or analysis that supports this claim. According to a number of economic analyses, lifting the crude oil export ban would increase GDP, enhance our balance of trade, spur additional investment in the U.S. and generate opportunities for small and mid-sized businesses along the oil and natural gas supply chain.
    • IHS Energy: “Every state and nearly every congressional district – even those far removed from the oil patch – benefit from the great revival in crude oil production due to the complex and integrated supply chain. For every job created in oil production, three jobs are created in the supply chain and six more in the broader economy.”
    • ICF International: “U.S. GDP is estimated to increase by $38.1 billion in 2020 if expanded crude exports were allowed.”
    • Brookings: Lifting the crude export ban “will have a positive impact on GDP and welfare” and in every case analyzed, “there are positive percentage change impacts on GDP.”
    • IHS Energy: “The higher US oil production resulting from a lifting of the ban will […] increase GDP by $135 billion.”
    • Government Accountability Office: “Removing export restrictions is expected to increase the size of the economy, with implications for employment, investment, public revenue, and trade. For example, removing restrictions is expected to contribute to further declines in net crude oil imports, reducing the U.S. trade deficit.”
    • Resources for the Future: “All parties can agree that lifting the ban confers some advantages to the United States as a whole. It would improve our trade balance and provide us with greater geopolitical leverage.”
    • Progressive Policy Institute: “U.S. oil and gas exports to the rest of the world are constrained by obsolete laws spawned during the ‘energy crisis’ of the 1970s… lawmakers should be using their political capital to repeal those laws and allow U.S. producers to freely trade oil and gas on world markets, like any other commodity.”
  • FACT: According to a recent EIA analysis, if the ban is repealed, refiners would still invest in expansion projects and both crude oil and refined product exports would increase. From the report:
    • “When the high resource case is considered in a scenario without crude export restrictions, crude exports increase to 2.4 million bb/d in 2025. Domestic processing capacity also increases, but to a significantly lesser extent than in the high production case with current crude export restrictions, as $2.3 billion is invested to build 0.8 million bbl/d of new stabilizer and splitter capacity. More costly hydroskimming refineries are not built, because the ability to export crude oil prevents the price of WTI from declining to a level that would support such investment. Crude imports decline, falling by 36% from 7.8 million bbl/d in 2013 to 4.9 million bbl/d in 2025, as refiners make the same adjustments to back out light and medium crude imports as in the high production case with current export restrictions, run their refineries at high utilization rates, and process light oil through splitters.” (emphasis added)

Claim: “Lifting the crude export ban could have important negative regional impacts.”

  • FACT: According to an executive at one of the nation’s largest refiners – which also exports significant volumes of crude oil to a Canadian refinery for processing – U.S. refiners “will continue to [be] competitive regardless of the environment in terms of crude exports.”  From the Houston Chronicle:
    • “We think the U.S. Gulf Coast refiners, the midcontinent refiners, will continue to competitive regardless of the environment in terms of crude exports,” [Valero vice president Anthony] Rouse said. That’s because U.S. refiners also have access to cheap natural gas, which they use to power their facilities, giving them a strong cost advantage over their global counterparts, Rouse said. Valero’s refineries have a $1 per barrel advantage over similar facilities in the United Kingdom and an even greater advantage than the Asian refineries, Rouse said.
  • FACT: Over the past nine months, more than 125,000 men and women have lost their job due to the downturn in the oil and natural gas sector. These good-paying jobs span the oil and gas supply chain and include steelworkers, operating engineers and other jobs in the oil patch. While most of these job losses are regional in nature, they span the entire oil and gas supply chain which touches every state. Repealing the ban will get some of these men and women back to work.

Repealing the ban on crude oil exports would create jobs and opportunity in communities across the country, enhance our national security and reduce the price at the pump for consumers. From oil patch states, to those who manufacture equipment that supports the development process, every state benefits from repealing the ban.

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