03.19.15 | Committee on Energy and Natural Resources U.S. Senate Hearing on U.S. Crude Oil Export Policy
Chairman and Chief Executive Officer
Key Points Supporting Repeal
There are several key points that are central to the case for lifting the ban on crude oil exports:
- A new era of U.S. energy abundance – There is no longer any question about whether or not the United States has enough oil and natural gas to meet domestic needs. The unconventional resources are real, they are abundant and they are here for the long term. Our long-held fear of impending energy shortages or concerns that future generations won't have enough energy is a holdover from a bygone era. A decade ago, when natural gas prices were above $10 per thousand standard cubic feet, we could not conceive of a day when we might be exporting natural gas. Now that day is here and natural gas prices are less than $3 per thousand standard cubic feet. This is because of actions industry took to develop our abundant natural gas resources. These actions have benefitted consumers and our nation. The same can be true for crude oil.
- Exports would help consumers save at the gasoline pump – Studies by the Brookings Institute, IHS Inc., Columbia University, Rice University, ICF, Resources for the Future and the Federal Reserve Bank of Dallas have all found that exporting American crude oil will increase global oil supply and lower gasoline prices. This seems counterintuitive, but here's the crux of the issue: U.S. gasoline prices, excluding taxes, are determined by global gasoline prices, which in turn track the global crude oil pricing trends. The entry of new oil supplies into the global market, such as from U.S. exports, would likely put downward pressure on gasoline prices. These points have been confirmed in recent studies by the Energy Information Administration (EIA), the Government Accountability Office (GAO) and the Congressional Budget Office (CBO). The IHS study shows that lower fuel prices would result in $265 billion in U.S. consumer savings annually between 2016 and 2030.
- Jobs would be protected and created – Repealing the crude oil export ban is vital to the health of the domestic E&P business and will incentivize ongoing investment by industry. By removing obstacles to investment, we can help protect jobs in this current low-price environment and create significant numbers of new jobs in the future. Another recent IHS study shows that 394,000 – 859,000 additional jobs could be created annually between 2016 and 2030 in the national economy as a result of the repeal. Importantly, as much as 24 percent of the new jobs would be in states with no oil production.
- Crude oil exports would grow the U.S. economy – Export sales of crude oil would stimulate demand for domestic production, thus increasing the economic contributions accruing to the United States from the energy renaissance. Studies show that U.S. GDP could increase on average by $86 to $170 billion annually between 2016 and 2030 and government revenue could increase by $1.3 trillion annually.
|Export sales of crude oil would stimulate demand for domestic production, thus increasing the economic contributions accruing to the United States from the energy renaissance. |
- Crude oil exports would strengthen the U.S. standing in the world – U.S. crude oil would find a ready market among purchasers seeking reliable supplies and enable our overseas allies to diversify their energy supplies, thereby strengthening U.S. commercial and geopolitical influence.
- Advanced technology and innovation are key drivers – The U.S. energy renaissance is a result of leading-edge technology that was originated, tested and perfected here at home, largely by the independent E&P companies. And the technology and expertise we have developed here for hydraulic fracturing and horizontal drilling are now being used worldwide.
- Not all oil is the same – The light oil we are producing today from unconventional resources is very different from other types of oil. It is lighter in gravity, contains a different mix of hydrocarbon compounds and yields a different mix of products. Thus, it requires different refining processes and equipment than many of our U.S. refineries are currently equipped to handle. Because of this, the U.S. needs to export light oil and continue importing heavier oil that those refineries are built to process.
- Rising U.S. crude oil production exceeds our domestic refining capacity – The rapid growth of U.S. crude oil production, particularly light oil from unconventional resources, has overwhelmed the current refining capacity for this crude type. In order to process it, many refineries either need to run inefficiently and require a steep price discount to do so or they need to make significant investments in new equipment. Neither of these options is feasible. In the absence of a market, U.S. light crude will be trapped, will decline in value and the economic merits for investment will also diminish.
American crude oil sells for less than global crude oil – The crude oil export ban, combined with the previously described mismatch of light oil with the needs of refineries, is discounting the value of an American product. American oil currently sells for $5 to $10 per barrel less than global oil. Every dollar subtracted from the price of American crude oil compared to the global price is a dollar that isn't reinvested in our country. More importantly, this discount is a particular threat in today's low-price environment. At current global prices of $50 per barrel, a $3 change can have the same impact as a $10 change in a $100 per barrel price. A wide discount between U.S. light crude prices and global crude prices has a disproportionately negative impact on U.S. producers. We are already seeing this in the market today. Projects are not economic, producers are cutting back dramatically on spending, and we are experiencing a significant negative impact on jobs, as well as local and state economies.
|The crude oil export ban, is discounting the value of an American product.|
Removing the crude oil export ban would resolve the refining bottleneck – The easiest, most efficient and immediate solution to the refining challenge would be to allow producers to sell their crude oil into the export market, as can currently be done with other energy commodities such as refined petroleum products, natural gas and natural gas condensates.
|Removing the crude oil export ban would resolve the refining bottleneck |
- Alaskan North Slope (ANS) oil represents the appropriate approach to crude oil export policy – In assessing the need for U.S. crude oil exports, policymakers need only look to the example of oil produced on Alaska's North Slope. Typically sent to market on the West Coast, ANS was exempted from the export ban in 1996, allowing exports to Asia. The Government Accountability Office found no resulting increases in gasoline prices for West Coast consumers.
- In lifting the ban, the federal government would still retain the discretion to reverse policy at any time. This point needs no further explanation.