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Oil Exports: Not Just About the Oil and Gas Industry

What state do you most associate with crude oil development? Alaska? North Dakota? Texas? That may be the case when thinking of actual production, but in order to explore for, produce and deliver that oil to consumers, a robust and nation-wide supply chain is required.

That was the focus of a recently released study from economic consulting firm IHS, which found that states such as New York, Illinois, and Florida, where oil production is either modest or non-existent, have much to gain from a healthy oil exploration and production industry. In fact, the study found that:

“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.”

The study is the first of its kind in evaluating the impact repealing the ban on crude oil exports would have on the supply chain. Nation-wide, the impacts are significant. From the study:

“Removing the crude export ban creates the following benefits in 2016–30 as higher activity levels work their way through the oil industry’s supply chain:

  • The crude oil supply chain will add $26 billion – $47 billion to GDP per year.
  • Supply chain jobs will be 124,000 – 240,000 higher per year, on average.
  • Labor income improves by about $158 – $285 per year, on average, for each household.
  • Cumulative government revenues from corporate and personal taxes attributed to supply chain industries reach $429 billion – $868 billion.”

As part of their analysis, IHS evaluated 60 different supply chain industries that support crude oil exploration and production and provided a detailed analysis outlining the impact repealing the ban on crude exports would have on each state and congressional district. Supply chain jobs are spread out across the following sectors:

Crude Oil Supply Chain

So, what’s standing in the way of these benefits? In short, a four decade old policy that was enacted during a time of perceived energy scarcity.

As noted in the study, because the crude oil export ban artificially depresses the price of U.S. crude oil (WTI), forcing producers to sell at a discount compared to international crude oil prices (Brent), it results in less U.S. oil production, investment, supply chain activity and job growth.

Following the release of the study, Pulitzer Prize winning author and IHS vice-chairman Daniel Yergin said:

“It’s important to remove the reason that the discount exists and the discount exists because of this artificial ban that prevents markets from working.”

Fellow study author Kurt Barrow noted:

“At these current prices, the spread between Brent and WTI is really the difference between viability and non-viability for a large amount of investment and a large amount of jobs. The jobs that are at risk are scattered across the country and throughout the supply chain.”

While this is the latest study in a growing body of research that demonstrates the clear economic and employment benefits to repealing the ban on crude oil exports, it makes clear what started just a few short years ago as a shale revolution in energy producing states, has the potential to cascade across the country if Congress and the Administration work together to repeal the ban on crude oil exports.

Here’s how the media reported the findings:

  • “While oil-producing states such as Texas and Louisiana claim a big share of the possible gains, nearly a quarter of the projected benefits are in states with virtually no crude production, such as Florida, New York and Washington.” (Houston Chronicle, 3/17/15)
  • “The fact the United States does not allow for oil to be exported is making a bad situation worse…the entire U.S. economy benefits from a healthy energy sector because the capital intensive nature of the industry means it sources supplies from across the country, not only from within the oil producing states.” (Calgary Herald, 3/17/15):
  • “In New York, a state that maintains a ban on hydraulic fracturing, or fracking, for natural gas, jobs for the drilling business have been created in big data analytics and database management. The number of those jobs would rise if the ban was lifted, said the report. In Illinois, jobs would be created in durable manufacturing of engines and machine tools and mining for fracking sand.” (Reuters, 3/17/15)
  • “In oil reliant states like Texas, core industries like construction and well services would see the biggest economic gains from lifting the export ban, according to the study. Texas and California account for 25 percent of the total U.S. supply chain jobs and labor income contributions. (Houston Business Journal, 3/17/15):

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4 responses to “Oil Exports: Not Just About the Oil and Gas Industry”

  1. John B. H. says:

    When the U.S. alouds crude exports we will see a better environment in the clean competition for market share in the global market . And a better middle class in the USA .

  2. Kirk Dupre says:

    Allow oil exports

  3. LA Tania Klipstine says:

    The Oil Export Ban was implemented during a time when scarcity at home was feared. It is outdated and needs to be repealed.

  4. waller says:

    sounds reasonable to me.

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