LONDON, April 1 (Reuters) - Lifting the ban on U.S. oil exports would cut gasoline and diesel prices for motorists, boost the national economy and create up to 300,000 new jobs, according to a study commissioned by the American Petroleum Institute (API).
Allowing exports would boost national output by $38 billion per year by 2020, equivalent to adding an economy the size of North Dakota, according to the consultants who wrote the report on “The impacts of U.S. crude oil exports on domestic crude production, GDP, employment and trade”, published on Monday.
Benefits from more oil production, higher royalty payments to mineral owners, and increased consumer spending from lower pump prices would more than offset a modest reduction in domestic refinery margins, in the view of ICF International, the consultants who prepared the study.
In March, U.S. Energy Secretary Ernest Moniz told oil and gas executives: “The industry could do a lot better job talking about the drivers for, and what the implications would be, of exports”.
The study is therefore one of the first in what is likely to be a long line of reports estimating the impact of allowing exports on the U.S. economy, as supporters and opponents try to sway Congress and the White House.
It comes after a similar report on U.S. gas exports concluded allowing large-scale shipments of liquefied natural gas (LNG) would provide a “net benefit” to the economy.
“Access to foreign customers could drive significant investment in U.S. production, helping to strengthen our energy security,” the API said in a statement. “Now that the U.S. is poised to become the world’s largest oil producer, the economic case for exports is clear.”
According to ICF International, the main boost to the economy would come from the increase in oil production itself. If exports were allowed, crude and condensate output could rise by an extra 130,000-300,000 barrels per day, with an additional 500-1,000 wells drilled each year between 2015 and 2035.
Higher oil production will in turn stimulate the manufacture of drilling equipment, increase demand for steel pipe and cement, as well as boost demand for other materials, equipment and services, with multiplier effects on jobs, incomes and output throughout the economy.
Higher oil output would also result in a modest reduction in global oil and refined product prices, cutting pump prices paid by U.S. motorists. Weighted-average U.S. product prices would decline by between 1.4 and 2.3 cents per gallon, under 1 percent.
Higher crude costs and lower product prices would inevitably compress margins for U.S. refiners, but the fallout would be modest. U.S. refineries would still be highly profitable compared to those in Europe and continue to run at full capacity, according to the report’s authors.
Allowing exports would align U.S. oil production with refining capacity more effectively. The United States would export more of its light crude to foreign refineries which would pay a higher premium for it, while increasing imports of medium and heavy crudes more suited to the coking capacity that U.S. refineries have installed.
“There is a fundamental mismatch between U.S. refinery capabilities, configured for heavier oils, and the country’s newfound supply, comprised of lighter oils,” the study explains.
“As exports of light crude oil are allowed, imports of heavier crudes (will) increase to better align with existing refinery configurations leaving net imports little changed.”.
A political science professor once told me cynically: “You can prove anything with econometrics”, depending on the choice of model and assumptions.
The API’s study is unlikely to convert opponents of crude exports among the country’s independent refiners and environmental movement.
Independent refiners oppose anything that would raise the price they pay for crude, while environmentalists worry that the increase in oil production is incompatible with efforts to curb greenhouse emissions.
But it provides some cover for legislators and the administration worried about the impact that lifting the ban might have on gasoline and diesel prices for ordinary motorists.
By suggesting that lifting the ban would have a positive but modest impact, the report will make it easier for the White House or Congress to relax the restrictions.
The ban is unlikely to be lifted in its entirety in the next two years. But there is probably enough support to begin easing the restrictions piecemeal. Policymakers are likely to start by lifting curbs on exports of field condensate, and then move on to crude for which foreign buyers are willing to pay significantly higher prices. (Editing by David Evans)