Individual states would see significant job creation and economic growth from exporting U.S. crude oil, according to a new state-by-state report by ICF International and EnSys Energy. Specifically, 18 states could realize more than 5,000 new jobs each in 2020 from crude oil exports, with state economies growing by hundreds of millions of dollars each.
Kyle Isakower, API vice president for regulatory and economic policy, talked about the study during a conference call with reporters:
“There is a growing realization that this is a new era for American energy. Scarcity is giving way to abundance, and restrictions on exports only limit our potential as a global energy superpower. Additional exports could prompt higher production, generate savings for consumers, and bring more jobs to America. The economic benefits are well-established, and policymakers are right to reexamine 1970s-era trade restrictions that no longer make sense.”
Earlier this year ICF estimated national benefits from lifting the ban on crude exports, including: $5.8 billion in consumer savings a year between 2015 and 2035 due to falling costs for gasoline, heating oil and diesel; up to 300,000 additional jobs created in 2020; a $22 billion decrease in the U.S. trade deficit in 2020; economic growth totaling as much as $38 billion in 2020; and an increase of as much as $13.5 billion in federal, state and local government revenues in 2020.
The new ICF/EnSys Energy report details the benefits on a state-by-state basis:
- Nine states – Florida, Michigan, Indiana, California, New York, Pennsylvania, Ohio, Texas and North Dakota – could see more than $1 billion each in state economic gains in 2020.
- Eight states – Illinois, Florida, New York, Pennsylvania, Ohio, California, North Dakota and Texas – could gain more than 10,000 jobs each in 2020. Again, a total of 18 could see more than 5,000 new jobs.
- States with significant manufacturing and consumer spending, such as California, could add nearly 24,000 jobs and more than $2 billion in economic activity in 2020. New York, an international hub for trade and finance, could add more than 15,000 jobs and $1.95 billion in economic activity in 2020.
“The U.S. is poised to become the world’s largest oil producer, and the study shows that access to foreign customers will create economic opportunities across the country. When it comes to crude oil, the rewards of free trade are not limited to energy-producing states. New jobs, higher investment, and greater energy security from exports could benefit workers and consumers from Illinois to New York, especially in areas where consumer spending and manufacturing drive growth.”
The case for exporting crude oil, which Energy Secretary Ernest Moniz and White House energy advisor Dan Utech have discussed this month, is both technical and economic.
U.S. refineries are mostly designed to process heavier crude oils, as opposed to the domestic light sweet crudes that are being produced in the Bakken and other areas. Various studies have shown that virtually all current and projected increases in U.S. crude production have been in light sweet crude. But, as a new IHS study finds, the U.S. oil system is nearing gridlock between rapid light sweet crude production growth and the inability of the U.S. refining system to economically process it. Exporting these crudes and importing heavier crudes better aligns with existing refinery configurations. At the same time, exports allow domestic light sweet crudes to reach the global market, which IHS says will help increase U.S. production. This boosts the domestic economy. Isakower:
“If … you share with (consumers) the broader economic benefits of higher energy production – meaning more jobs, more government revenue, lower trade deficit – I think these are all very important messages to get to the consumer.”
Energy consumers would see positive impact from crude exports. While refined product prices are tied to global product market prices, the ICF/EnSys Energy report projects that additional U.S. crude supply into the global market would exert downward pressure on the cost of crude, lowering global product prices and putting downward pressure on domestic product prices.
“Some will continue to argue that limits on trade are in the interests of consumers. But these arguments ignore the simple fact that consumers buy fuel – not crude oil – and the prices of refined products are set by a global market. Gasoline is already eligible for trade after oil is refined. Restricting the flow of America’s growing crude supplies only puts downward pressure on U.S. energy production – not prices at the pump. But this analysis shows that if oil can flow to the global market, then we begin to see higher global supplies, more production, and consumer-level benefits – as well as more American jobs.”
IHS puts it this way:
The assumption that allowing crude oil exports would result in higher gasoline prices for consumers is not accurate. US gasoline, unlike crude oil, is part of a globally-traded gasoline market, meaning that US prices at the pump reflect global prices. At present, the current policy is discouraging additional crude oil supplies from being brought to market, which actually makes gasoline prices higher than they otherwise would be.
Isakower said Americans also would benefit from the stabilizing impact of U.S. supply added into the global market:
“With growing American production … we’re seeing a greater stability in global oil prices. Because we have higher production levels globally and it’s coming from more countries, more places around the world, you’re seeing a stabilization of prices – such that when you see there’s a dropoff in production in say, Libya a year ago or so, when their production dropped off, you didn’t necessarily see a huge spike on the global market. … Equally important, increased U.S. strength as an energy exporter would provide greater stability in world markets and help to ensure that our allies overseas aren’t left dependent on any single supplier. Strategically, a decision to expand U.S. exports would bolster our geopolitical influence at a time when energy security is reshaping world power.”