WASHINGTON -- As the Obama administration weighs lifting restrictions on crude-oil exports, a new report by the U.S. Government Accountability Office (GAO) lends support to the move. The GAO reviewed studies that examine the impact of removing crude-oil export restrictions and interviewed stakeholders. Its finding: gasoline and diesel retail prices would likely decline even as domestic crude-oil prices rise.
According to the report, with a lifting of export restrictions, U.S. crude oil prices would rise between $2 and $8 per barrel, moving closer to the international benchmark. However, because oil exports would increase global oil supplies, the retail prices for gasoline and diesel could fall since they are tied to world prices.
Some caveats: Prices in different regions of the United States could react differently and in some cases increase. Also, the degree of the impact depends on several factors, such as the size of domestic oil production increases and how quickly refiners in the United States can absorb them, as well as how the global market reacts to growing U.S. production and exports.
On the point of consumer fuel prices, the GAO report discussed four different estimates of the impact of lifting domestic oil exports, ranging from a decrease of 1.5 to 13 cents per gallon (CPG), or 0.4% to 3.4% of the average U.S. retail gasoline price at the start of June 2014. A study by IHS had the most aggressive scenario, suggesting a drop in gas prices of 9 to 13 CPG from 2016 to 2030.
"If domestic crude oil exports caused international crude oil prices to decrease, consumer fuel prices could decrease as well," the GAO report found.
The degree of this decline, however, depends on several factors, the GAO report said, including:
- The closeness of the relationship between domestic oil prices and domestic retail fuel prices.
- How the global oil market would react to the entrance of U.S. crude, including the response of the Organization of the Petroleum Exporting Countries (OPEC).
- According to a couple of stakeholders the GAO interviewed, there may be regional differences in how retail fuel prices react to more domestic crude exports, with the Midwest and Northeast potentially seeing higher prices because of greater transportation costs and the potential for refinery shutdowns.
The GAO study review and interviews also found that lifting export restrictions could increase domestic crude production from an additional 130,000 to 3.3 million barrels per day from 2015 to 2035 because of higher domestic crude prices. This could have implications for the environment, including greater surface groundwater risks, increased greenhouse-gas emissions and a higher risk of oil spills. Finally, the studies and interviews suggest that lifting export restrictions would grow the economy, trim oil imports and narrow the U.S. trade deficit.
The GAO report ultimately recommended that the government reconsider the size, location and makeup of the Department of Energy's (DOE) Strategic Petroleum Reserve (SPR), noting that increased domestic oil production and fewer imports would mean the SPR could be downsized.
"Without such a reexamination, DOE cannot be assured that the SPR is sized appropriately and risks holding excess crude oil that could be sold to fund other national priorities," the report stated.
Click here to view the full report.
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