Posted October 14, 2014
A new study by the Aspen Institute joins a series of analyses concluding that one benefit from exporting U.S. crude oil would be lower gasoline prices here at home. Aspen’s projected reduction of between 3 and 9 cents per gallon parallels findings in previous major studies by ICF International (3.8 cents per gallon), IHS (8 cents) and Brookings/NERA (7 to 12 cents) that exports would lower pump prices.
Aspen and the other studies project other benefits from exporting crude oil, including broad job creation, economic growth and increased domestic energy production. Yet the solidifying consensus that consumers also would benefit is critically important as the public policy debate on oil exports continues.
The Aspen study – co-authored by the institute’s Thomas J. Duesterberg, Donald A. Norman of the MAPI Foundation and the University of Maryland’s Jeffrey F. Werling – found that the surge in U.S. domestic oil production is creating a surplus of light sweet crude that’s mismatched for a refining sector configured mainly to process heavier crudes. Exports would allow that oil to reach market and help spur more production and accrue a number of benefits. Aspen:
A number of studies have found that lifting the ban on crude oil exports would have a positive impact on GDP growth, employment and income. Our results reinforce the findings in these previous studies. Lifting the ban on crude oil exports has significant positive and durable effects on GDP, aggregate employment and income.
- $165 billion increase in GDP in 2019-2021.
- 650,000 jobs added at peak in 2019.
- Real household income increases of $2,000 to $3,000 per household in 2025.
- Production of durable goods and materials would increase 1.4 percent ($8 billion) by 2017; mining and construction equipment would grow by 6 percent ($6 billion) in 2017.
- All manufacturing jobs would see an average gain of 37,000 per year through 2025, construction jobs would grow by over 217,000 in the peak year 2017, and related professional services jobs would grow by an average of 148,000 per year.
- Capital investment for machinery—exploration and development—would increase by $7 billion in 2020.
Crude exports are key to seeing U.S. domestic production increases – the linchpin to the economic benefits listed above. Aspen:
Because of constraints in domestic refining … much of the potential growth in crude oil production will not be realized unless global markets can be accessed. According to many studies, we are fast approaching a tipping point where growth in U.S. crude oil production will be economically challenged, unless the long-standing ban on exports of crude is lifted.
The study explains that domestic pump prices will not increase if U.S. crude is exported. Norman:
“The increase in production that would be attained by lifting the ban on exports would lead to additional production that would lead to additional downward pressure on the world price of oil relative to where it otherwise would be. As a result we expect that there would be modest downward pressure on prices of petroleum products including gasoline, which could fall modestly by 8 to 9 cents a gallon.”
Randall Hogan, chairman and CEO of Pentair, part of the vast energy industry supply chain, said the benefits to manufacturing employment from allowing crude exports probably would be greater than the Aspen study projects:
"If anything I think it understates the job (benefit). This is transformative. I’ve been around the energy industry 35 years … but having the petrochemical industry come back, have it drive the manufacturing renaissance here in the United States, based on long-term secure energy costs, that’s the way we’re going to get the country moving again. Lifting the ban … is just the natural thing for us to do. It’s the right thing for us to do. … This can be an entirely different phase for American manufacturing.”
ABOUT THE AUTHOR
Mark Green joined API after a career in newspaper journalism, including 16 years as national editorial writer for The Oklahoman in the paper’s Washington bureau. Mark also was a reporter, copy editor and sports editor. He earned his journalism degree from the University of Oklahoma and master’s in journalism and public affairs from American University. He and his wife Pamela live in Occoquan, Va., where they enjoy their four grandchildren.