EIA: Modest benefits to allowing crude exports

OREANDA-NEWS. September 02, 2015. US gasoline prices would at most drop by a penny per gallon if Congress repeals a decades-old restriction on exporting crude, says a new report from the US Energy Information Administration (EIA).

Gasoline prices would drop to \\$2.90/gallon from \\$2.91/gallon on average by 2025 if oil producers were able to export crude without restrictions, EIA said in its report today. The agency also found allowing crude exports would have no effect on US crude production.

The release of the report comes one week before the US Congress returns from its summer recess and begins to consider whether to lift export restrictions imposed in 1975 in the wake of the Arab oil embargo. US oil producers have been lobbying Congress to lift the restrictions so they can get access to global markets where benchmark prices averaged \\$5.62/bl higher than the US benchmark last year.

"The EIA report only reinforces the economic benefits of exports outlined in every other major study — more US jobs, greater US energy production and downward pressure on fuel costs," American Petroleum Institute regulatory affairs head Kyle Isakower said today.

But independent refiners, which support maintaining export restrictions, said the small reductions in petroleum product prices that EIA found did not justify lifting the restriction. The agency under four different scenarios found gasoline and diesel prices by 2025 would not change by more than a penny per gallon, if export restrictions were lifted.

"We think that it is a pretty thin reed to use to justify repealing our 40-year-old energy independence law," said Crude Coalition executive director Jay Hauck, who represents independent refiners such as Monroe Energy and Alon USA. The group plans to release its own report today to support its argument that lifting export restrictions would push up gasoline prices.

EIA in its report assumes that global crude prices will continue falling this year but gradually rise to \\$90.23/bl by 2025. Based on this assumption, EIA expects US production to hit 10.28mn b/d in 2025, with or without export restrictions. The report found export restrictions could hinder US production, but only if there were unexpected advances in technology or new domestic supplies.

Lifting the export restrictions would cause the US and global benchmark crude prices to fall slightly, EIA found, with US crude prices dropping by \\$0.17/bl to \\$84.15/bl by 2025 and global prices dropping by \\$0.18/bl to \\$90.23/bl. The report said other factors affecting global supply and demand play a larger role in determining crude prices.

The largest effect of retaining export restrictions could occur if there was an unexpected boom in US crude production brought about by technology advances or the discovery of more domestic resources. EIA found that under that scenario, the US benchmark crude price would be at a \\$15/bl discount to global prices with export restrictions, compared to a \\$8.81/bl discount without restrictions.