A new report makes the bold assertion that lifting the 40-year old ban on U.S. oil exports would create hundreds of thousands of jobs, hundreds of billions of dollars in new investment in the U.S. economy and lower gas prices.
Energy historian Daniel Yergin, Vice Chairman of research firm IHS, says not lifting the ban will impose increasing costs on the U.S. economy, but ending it will boost growth.
"We calculated that if the ban were lifted it would add $750 billion of new investment," says Yergin. The IHS report also concludes that ending the ban create more than a million new jobs just in the next three years and lower gasoline prices by an average 8 cents per gallon annually over the 2016-2030 period. It uses 2016 as the starting point because no action on ending the ban is expected before 2015, after the 2014 mid-term elections, says Yergin.
Forty years ago the U.S. imposed a ban on crude oil exports, following the 1973 Arab oil embargo. Recently, a movement to end it has gained some momentum as the U.S. is poised to produce more oil and gas than Saud Arabia and Russia.
Energy Secretary Ernest Moniz and White House Advisor John Podesta have each recently said the White House was considering lifting the ban though no decision has been made. And on Thursday, research firm IHS released a report promoting the ban's end. It was sponsored by ExxonMobil (XOM), Chevron (CVX) , Halliburton (HAL) and several other oil production and service companies.
"This ban is a remnant of an era long gone," Yergin tells The Daily Ticker. "Our policy and our thinking have to catch up with new reality."
Although it may seem counterintuitive, Yergin says exporting crude oil would actually lead to more U.S. oil production, which is already 64% higher since 2008 due to unconventional extraction methods like fracking. He explains in the video above that the U.S. produces millions of barrels of "very high quality light oil" which can't be processed by many refineries here since they focus solely on processing heavier crude. The result: a traffic jam of unrefined crude in the U.S. Gulf and discounted prices for U.S. light crude, which has ranged from about $4 to $25 a barrel below the price of North Sea Brent oil over the past year.
That discount discourages investment to retool U.S. refineries or build new ones especially since refiners "have already spent $85 billion just to handle heavy crude," says Yergin.
Another reason to end the ban on crude exports: a distortion in the U.S. oil energy market. The U.S. is the "biggest exporter" of refined products, shipping almost 4 million barrels a day of gasoline and jet fuel overseas, says Yergin. It "doesn't make sense" that it can export one but not the other, says Yergin.
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