Study says oil exports could hold gas prices lower

05/29/2014 3:52 PM

05/29/2014 3:53 PM

Gasoline prices for U.S. drivers could be up to 12 cents a gallon lower than they would be otherwise in coming years if the nation lifts its 41-year ban on exporting crude oil, an industry-funded study says.

The report by IHS Energy comes as producers seek new markets for the swelling supply of crude oil from U.S. shale wells, which has raised domestic supply by more than 60 percent since 2008.

Big production gains in natural gas have also spurred similar efforts to boost exports, which are allowed only in limited cases.

In an interview, Daniel Yergin, a respected energy analyst and vice chairman of IHS, called the ban a “relic of an age long gone,” referring to the 1973 Arab oil embargo, which produced sharply higher oil and fuel prices and a new sense of energy insecurity.

Besides lower gasoline prices, the study forecasts that the U.S. economy would have nearly 400,000 additional jobs on average from 2016 to 2030, the period examined in the study.

Texas would be a prime beneficiary, gaining an average of 48,000 jobs, $11.2 billion in additional annual gross state product and $136 billion in total additional government revenue in that time. Those numbers roughly double both nationally and in Texas under a scenario of even higher production.

The export ban, by Yergin’s estimate, makes oil and gasoline more expensive than they would be otherwise. That’s because U.S. refineries are generally configured to handle heavier grades of crude. The lighter-grade oil coming from new production in Texas and North Dakota can be sold for more abroad and would add to the international supply, thus potentially lowering global prices.

Importantly, Yergin doesn’t expect oil and gasoline prices to be cheaper than what motorists are paying today. Rather, the price of these products would grow more slowly than they would have otherwise, he said.

The 120-page report said savings could be 8 cents a gallon in the base case and up to 12 cents in the high-production scenario, as U.S. oil exports could reduce world oil prices by $3 to $5 a barrel over 15 years.

It estimates that the broader economy would grow 0.7 percent to 1.2 percent faster over the period as a result of the cheaper prices and additional consumer spending power.

“The benefits of this in terms of investment would flow through to the entire economy in a pretty significant way,” said Yergin, who won the Pulitzer Prize in 1992 for his book The Prize: The Epic Quest for Oil, Money & Power, which dissected the history and geopolitics of oil.

The federal Energy Information Administration is doing its own research into the consequences of lifting the export ban in light of U.S. production, which rose by 15 percent last year, the largest single-year gain since 1940.

The IHS study was funded by a group of prominent energy and oil field service companies, including Chevron, ConocoPhillips, Continental Resources, Exxon Mobil and Halliburton.

“Obviously, people who don’t like the study will point to that,” Yergin said. “This is our reputation, our work, and this is where our research led us.”

Staff writer Jim Fuquay contributed to this report.

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