Posted on 04/01/2014 5:08:21 AM PDT by thackney
The oil industry’s leading trade group on Monday cast exports of U.S. crude as an economic win for consumers, fighting against criticism that selling the fossil fuel overseas would mean higher prices at home.
The American Petroleum Institute commissioned a study by ICF International and EnSys Energy predicting lower gasoline prices, domestic job growth and other economic benefits if the United States lifts its 39-year-old ban on exporting U.S. crude.
“Consumers are among the first to benefit from free trade, and crude oil is no exception,” said API Vice President Kyle Isakower told reporters in a conference call Monday. “Gasoline costs are tied to a global market, and this study shows that additional exports could help increase supplies, put downward pressure on the prices at the pump and bring more jobs to America.”
The new study finds that oil exports would reach 2 million barrels per day by 2017 — nearly a quarter of current production — if the trade restrictions were lifted.
The big beneficiaries would be domestic oil producers, who would see U.S. crude prices climb closer to global benchmark, Brent crude.
Lower gasoline prices
The study determined that, if crude oil exports were allowed, gasoline prices in the United States would cost 1.4 to 2.3 cents less per gallon between 2015 and 2035, measured in 2011 dollars. Lower overall costs for gasoline, heating oil and diesel could yield an extra $5.8 billion in annual consumer savings, ICF International and EnSys Energy found.
Critics of easing the export ban, including Sen. Ed Markey, D-Mass., have argued that by sending domestic oil prices higher, gasoline costs would inevitably climb.
API’s Isakower said the ICF report was “the most detailed analysis available” on the wide-ranging economic effects of potential crude exports, though at least three other studies are currently in the works, including one from the U.S. Energy Information Administration.
Refiners profits
But the margins for domestic refiners would be squeezed if the export ban were lifted, because they would pay more for crude oil even as the price of the resulting gasoline dips slightly, ICF said.
If exports were allowed, “the increase in domestic crude prices is much larger than the reduction in world crude oil prices, and so the average cost of crude to U.S. refineries goes up more than do refined product prices,” the study said. “This is the major reason why refinery margins decline.”
ICF’s discussion of how oil exports would shake up U.S. refining puts new numbers behind the sector’s apprehension on the issue. Under the current dynamic, refiners are able to freely export gasoline, diesel and other petroleum products, even though the U.S. largely blocks exports of raw, unprocessed crude. The scenario ensures they have been exporting record amounts of the refined products and enjoying relatively high margins, as domestic oil production surges.
“The lower prices for U.S. oil, a result of surging production, improve U.S. refinery margins but do not reduce gasoline or diesel prices,” the study said, because refiners “have the ability to export these products at global market prices.”
With the prospect of oil exports threatening that dynamic, some small, independent refiners have formed a coalition to fight changes to the 39-year-old trade restrictions.
Oil industry leaders say exports also are needed to help resolve a mismatch between domestic production of light, sweet crude, and U.S. refineries optimized for processing heavier varieties.
“Often, it makes sense to export a surplus of expensive, light oil from one region and import cheaper, heavy oil in another, rather than ship more expensive oil cross-country,” Isakower said. “This is especially true in the absence of sufficient infrastructure to efficiently transport crude to the refineries that could use it. But export restrictions effectively insulate consumers from the positive benefits of efficient markets.”
Benefits of exports
The report also predicted that expanding crude exports would:
spur as much as $70.2 billion in additional investment in U.S. oil exploration, development and production between 2015 and 2020. put an extra 110,000 to 500,000 barrels online every day in 2020. boost U.S. refinery throughput by 100,000 barrels per day from 2015 to 2035, by ending refinery process bottlenecks caused by mismatched crudes. support 300,000 new jobs across the economy in 2020.
Much of our new shale oil production has been light and sweet. Exporting this more valuable crude oil while importing cheaper, lower quality crude oil would help our trade balance while spurring more investment in the US.
Links to related stories at the source.
Fuel prices will really fall if the EPA was gotten rid of.
It’s almost like there was some relationship between supply, demand, and prices.
“... gasoline prices would be 1.4 to 2.3 cents less per gallon between 2015 and 2035 ...”
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I can save between 1 1/2 and 2 1/2 cents per gallon in the next 20 years?
Some forecaster has a very sharp pencil, indeed.
Correction...the EPA and the California Air Resources Board...and entity that's harmed this nation every bit as much as has the EPA.
Of course when secession gets rolling in earnest the newly formed "Decent States of America" won't have to worry about CARB anymore.
The issue here would seem to be lack of U.S. refinery capacity. Our regulatory burdens make new construction and ongoing compliance a nightmare.
Ergo, the regime and it's leader, "skyrocket" Ø, will do what it can to prevent exports.
ditto
maybe I a total idiot on economics but
if we can export oil why are we importing crap
from the Saudis and the Gulfies? Screw them,
we can depend on our own. It’s not like they’re
needing a customer. The Chinese and Europeans
will eat up Arab oil in a heart beat.
I do not think so. The US already refines more product that we use ourselves. We have surplus capacity.
We import more oil than we need for domestic demand, refine it and export the surplus products. Some of that is refinery "leftovers", the bottom of the barrel after higher quality fuels like gasoline and diesel have been separated out. Petroleum Coke and Residual Oil are examples of those.
I will say it again.
Many US refineries were upgraded to handle heavy and sour crude oil. That is cheaper than light and sweet.
Much of our new shale oil production has been light and sweet. Exporting this more valuable crude oil while importing cheaper, lower quality crude oil would help our trade balance while spurring more investment in the US.
Buy their cheap stuff while selling our expensive stuff and still meeting the domestic demand.
Fat chance.
A very small amount. It is based upon using more low grade, lower cost oil.
At one time we imported 25% of the world’s oil. As we approach energy independence and in turn release oil to the world market that has to hurt countries like Russia and the Middle Eastern countries who rely on oil as the main support for their economies. That’s a big chunk of demand to disappear.
Do you understand why the Saudis panicked over our fracking and the bonanza of oil and gas we’re reaping as a result? While many in this country don’t see the writing on the wall, they do.
I have no doubt that Obama’s recent side trip to Saudi Arabia was in response to their request. I’m sure Syria was discussed and very likely the potential damage to their national interests by our rapidly approaching energy independence.
While many have continued with the drill baby drill mantra, the energy industry has been doing that for years looking for natural gas and oil on privately owned lands. The federal government’s restrictions didn’t apply.
Now that we have the domestic supply we need, why not administer the coup de grace to OPEC which will have the bonus of undercutting the cash flow to the state sponsors of terrorism? You can always count on rats to look after their own interests. That means pumping more oil to maintain their income to cover critical national spending. It’s time to make them compete for sales and watch what happens to the world price of oil.
One analyst is predicting oil in the $20/bbl range. I doubt that. But we are going to see a much lower price.
There’s a lot of support out there for that and it’s growing. That includes Congress. Even Democrats are on board. While many may have forgotten the extortion of the oil embargo forty years ago, the current example of Russia’s aggression enabled by huge sums from non-competitive energy sales is fresh enough to provide the support for changes in our policy.
Lets export the democratic party and the prices of everything will fall.
Oddly enough, though, there always seems to be "refinery maintenance" initiated at precisely the right time to keep any drop in crude prices from showing up at the gas pump.
Its no surprise that the American Petroleum Institute would put a very positive spin on this. Would anyone expect them to say that exports might result in some bad economic side effects?
Whatever, but IMO its a good idea to protect yourself by having some oil related stocks/ETF's. If crude shoots upward up, there's some financial offset against rising oil prices.
Interesting article; thanks for posting. FYI, here's one trader's view....
http://finance.yahoo.com/blogs/breakout/why-crude-could-gush-over--150-192338627.html
Excellent post. Absolutely true.
But of course gasoline prices once drop with crude prices rising. Any fool knows that. It's basic economics, the more you pay for your stock the less you charge for your product. I am surprised we needed a high power oil producer study to tell us this.
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