Posted on 01/14/2015 12:46:32 PM PST by 2ndDivisionVet
The politics of the crude exports issue are confused by a lot of irresponsible reporting. Almost every story on the issue asserts that allowing exports would be politically dangerous because it would supposedly raise prices at the pump, but the claim is never credibly sourced. In fact, every single serious study has found precisely the opposite: allowing crude exports would lower prices at the pump.
With Senator Ted Cruz leading the charge on an amendment to end the export ban, some reporters will be working even harder to pretend his amendment is dubious or even destructive. But facts matter.
The Government Accountability Office (GAO) recently reviewed four econometric studies of the issue – by Resources for the Future (on their own behalf), ICF International (for the oil industry), IHS (also for the oil industry), and NERA (on behalf of the liberal-leaning Brookings Institution). All four studies found prices at the pump would decline if exports are allowed, with estimates ranging from 1.5 to 13 cents a gallon.
Why? GAO said “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.”
The Federal Reserve Bank of Dallas did its own analysis and reached the same conclusion: “Lifting the U.S. ban on crude oil exports would alleviate a growing glut of oil at the Gulf Coast refineries and should eventually reduce retail gasoline and diesel prices, benefiting U.S. consumers.”
The U.S. Energy Information Administration agreed too. Their analysis found that domestic crude prices have no relationship with prices at the pump, which move with the global price of crude in every U.S. region because gasoline is traded globally.
Of course, it’s not just about prices at the pump. GAO also found that: “Removing export restrictions is expected to increase the size of the economy, with implications for employment, investment, public revenue, and trade.”
A study by the Aspen Institute found lifting the ban would add 630,000 U.S. jobs and drive a boom in manufacturing.
The oil and gas sector has been the U.S. economy’s brightest bright spot in recent years, but the glut of crude oil is holding back an even bigger boom. We are leaving oil in the ground because of the export ban. It’s a self-defeating and destructive policy that hurts America while benefiting rivals abroad.
That’s why lifting the export ban has also been endorsed by groups as varied as the Council on Foreign Relations (“It would also avoid putting Washington at odds with allies that would like to source their oil from the United States”) and the Heritage Foundation (“all Americans will reap the benefits of lower prices and a stronger economy”).
Exports would rebalance the market, ramp up U.S. production, and keep downward pressure on global prices. (They are also self-limiting: If domestic demand increases in the future, exports will decline. No government help required.)
So, on one side we have GAO, EIA, the Dallas Fed, NERA/Brookings, ICF, IHS, Aspen, CFR, and Heritage, and on the other are a handful of refineries that are fattening their profit margins on artificially low domestic crude prices, with an army of reporters and political activists who see this as an opportunity to stir up controversy even though the issue is, on the merits, a no-brainer.
Even expectations of rising exports were, according to experts interviewed by Bloomberg, enough this week to close the gap between U.S. and global crude prices. Congress should happily meet those market expectations by passing an amendment and making the export ban just another bad memory of the 1970s.
******
Phil Kerpen is head of American Commitment and a leading free-market policy analyst and advocate in Washington. Kerpen was the principal policy and legislative strategist at Americans for Prosperity for over five years. He previously worked at the Free Enterprise Fund, the Club for Growth, and the Cato Institute. Kerpen is also a nationally syndicated columnist, chairman of the Internet Freedom Coalition, and author of the 2011 book "Democracy Denied."
The Saudis ain’t gonna like this.
Ted Cruz 2016!
Counter intuitive.
¡Si se puede!
Did the CofC write this? Glut = lower prices. Common sense.
The tax-and-spend leftists and the enviro-whackos are doing back flips....taking a tax dollar from a DemoRat is next to Armageddon.
I’m not sure whether they are right or not about the direction of oil prices, but are we not in favor of allowing the free market to work as a matter of principle? Is it not a fairly large distortion of the market to not allow a commodity to be exported if the market participants find it profitable to do so?
Seems to me that the USA runs a 7 million bbl oil deficit a day. Why would a country export what it needs domestically?
The Saudis ain’t gonna like this.
++++
Nor will Al Gore, Obama, any Dem not from an oil producing state and liberal wackos nationwide. It has no chance of experiencing daylight.
But it shows that Cruz knows his stuff. No surprise here.
The Federal Reserve Bank of Dallas did its own analysis and reached the same conclusion: "Lifting the U.S. ban on crude oil exports would alleviate a growing glut of oil at the Gulf Coast refineries and should eventually reduce retail gasoline and diesel prices, benefiting U.S. consumers."Y'know, because an oil glut results in higher prices. /s
“Seems to me that the USA runs a 7 million bbl oil deficit a day. Why would a country export what it needs domestically?”
I always hear it explained it is easier to export some from one part of the country and import into another because of difficulties in shipping it across. Something like that anyway. It does seem to be a mixed up thing.
Not around here we aren’t — allowing willy-nilly international markets to burn up our oil is part of some kind of free-trader global agenda of the bilderbergers.
A free market will always be more efficient than a market with government intervention and what does efficiency do to a business bottom line?
Think about a foreign producer like the Saudis competing with a US producer. The Saudis only competes with the US producer on the US market. The Saudis can drop the price it sells a barrel of crude here in the USA to undercut the domestic producer while raising the price it sells oil to Japan where US company can’t compete.
Add to that the type of crude that is produced heavy vs. light crude and where the refineries are to process the specific types of crude oil and it gets even more complicated.
The ban on domestic producers to sell overseas hurts our domestic oil and gas companies and will have the net effect of you and I paying more in the future for crude from foreign producers.
That doesn't make any sense, to me, at least..................
They needed to explain in the article. The glut is in light sweet crude while most refineries on the gulf coast are set up to process heavy crude (a lot of which is imported).
Most of the increase in domestic production is light sweet crude. It will take time for refineries to make the switch. Opening up exports should give a place on the market for the lighter crude to go. The drop in price would come from efficiency gains in the market and would help domestic producers.
It is not just the demand market for a local supply.
The Gulf region does not have an overall glut of oil, but specific to light, sweet oil in a region with many heavy, sour based refineries.
Even before the price drop, there was concern about investing too much production into producing that specific type oil. Eliminate the restriction of the market they can sell to, and more gets produced locally. The supply will grow even more.
You need to complete that equation.
Glut => lower prices => less local production/supply => eventual higher prices.
Opening up more demand markets will bring in more supply. Otherwise the producers invest their money else where for better return on their dollar and still sell the oil, but from somewhere else.
Because all oils are not the same and location makes a difference.
The Permian, Eagle Ford and Bakken, along with some other tight formations have been most of the US oil production growth over the last 6~7 years. That oil is light sweet, and production/pipelines economically bring it to the Gulf Coast.
The Gulf Coast refineries, has spent Billions of dollars upgrading to efficiently run on the cheap, heavy, sour imported oil over many years. It has the most BTUs per barrel and is the cheapest on the global market.
But our production growth has been light sweet. We are reaching saturation in the area to efficiently process light sweet. We can import the cheap stuff, export the expensive stuff and use the refineries we already upgraded.
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