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The 40-year-old oil export ban has hit a mid-life crisis. The prohibition on U.S. oil exports was born in 1975, a time of decreasing domestic oil production, the fallout from Arab oil embargos, and high oil prices.
Today’s energy environment is much different, Encana President and CEO Doug Suttles told the audience at the U.S. Chamber of Commerce Foundation’s CEO Leadership Series:
American oil production has almost doubled from a low of 5 million barrels a day in 2008, back to the peak attained in 1970.
“Today, largely because of the export ban, a barrel of American crude oil sells for about $10 less than the global oil price,” Suttles explained, “It is absurd that other countries can sell their crude into U.S. markets while U.S. crude is essentially locked out of global markets.”
The outdated oil export ban is an ill fit for “our new energy abundant reality.” Here are Suttles’ four reasons for ending it:
1. It Will Lower Price of Gas
The price at the pump is tied to the global price of crude, because refined products are traded globally. Adding U.S. crude oil to the global oil market would help to increase global supply, putting downward pressure on global prices while simultaneously increasing the price the United States receives for its crude.
Several independent economic studies, including one from the U.S. Government Accountability Office, agree that repealing the export ban will put downward pressure on gasoline prices. Global consultancy ICF International suggests this may save an average of up to $5.8 billion per year between 2015 and 2035. Meaning Americans pay less at the pump while state and federal tax revenues go up.
Adam Sieminski, administrator of the U.S. Energy Information Administration, came to a similar conclusion, telling Platts Energy Week TV, "Preliminary evidence suggests that gasoline prices get set in the global markets."
2. We Will See an Increase in Tax Receipts, Jobs and Investment
If we closed the $10 differential between the U.S. and global oil price, about half could be collected through Federal and State taxes and royalty owners – helping finance schools, roads and public services. It’s anticipated that the industry would reinvest to increase production, create more high paying jobs across the country and ultimately generate more tax revenue. It’s an economic win for all Americans.
Economic consulting firm IHS Energy believes ending the ban would add $751 billion of investment in the upstream E&P sector; increase crude production, create an additional 394,000 jobs, add $86 billion to annual GDP and add $239 per year of disposable income, per American household.
The IHS study estimates that through 2030, $1.3 trillion will be added to government treasuries if the export ban is lifted.
3. Global Supply Will Be Stabilized
Increased oil production from the U.S. would stabilize global supply, providing some insulation against future volatile global prices caused by unpredictable production from other producing countries. It would enhance America’s energy security, amplify the effectiveness of sanctions, boost U.S. geo-political standing and create opportunities to develop new energy trading relationships with allies around the world.
Bloomberg reports that if the ban is lifted, as much as 2.4 million barrels of oil a day could be exported, making “the U.S. the fourth-largest oil exporter, behind Saudi Arabia, Russia and the United Arab Emirates.”
4. It’s Widely Recognized as Sound Policy by Leading Thinkers
Economists, national security and foreign policy experts are in favor of it. Polls show that two-thirds of American voters support the sale of U.S. crude oil to our trading partners and believe it would create jobs, lower gasoline prices, shrink the trade deficit and strengthen America’s global strategic position.
“Liberalizing the crude oil export regime would advance U.S. foreign policy,” writes Blake Clayton at the Council for Foreign Relations, “It would demonstrate Washington's commitment to free and fair trade.”
Suttles joined the growing number of voices from inside the industry and out calling to end the oil export ban. In March, ConocoPhillips chairman and CEO Ryan Lance, made the case for lifting it at the U.S. Chamber.