GAO: Allowing Oil Exports Could Drive Gas Prices Down Even Further
Removing restrictions on the export of crude oil would boost the economy, increase U.S. oil production and lower gasoline prices, according to a report by the Government Accountability Office.
GAO reviewed 1970s-era policies that restrict oil exports in the name of energy security. But these policies are thwarting economic growth and hampering U.S. oil production, according to studies the agency reviewed. Allowing more oil exports could decrease gasoline prices, according to GAO.
“The studies we reviewed and most of the stakeholders we interviewed suggest that consumer fuel prices, such as gasoline, diesel, and jet fuel, could decrease as a result of removing crude oil export restrictions,” GAO found. “A decrease in consumer fuel prices could occur because they tend to follow international crude oil prices rather than domestic crude oil prices, according to the studies and most of the stakeholders.”
The oil and gas industry and some Republican lawmakers have been pushing hard for reforms to allow for crude oil exports onto international markets.Export proponents have also lobbied the Obama administration to use its executive authority to allow for increases in oil exports while Congress debates the issue.
“This latest review by the GAO is a welcome addition to the growing body of analysis supporting the case for greater oil exports,” said Alaska Republican Sen. Lisa Murkowski, the lawmaker that asked the GAO to review oil export studies.
According to experts, restrictions on U.S. exports mean that oil producers must sell their product to refiners at a discounted price — about $8 per barrel on average in 2014 — since it can’t be put onto international markets.
Refiners get a nice discount on crude to make into gasoline and other products, but gasoline prices are set on international markets which means that consumers are still paying gas prices set on international markets, largely without seeing benefits from cheaper U.S. crude.
Allowing exports would increase the price of U.S. crude oil, but would in turn mean more oil is on the world market, driving down gas prices paid by consumers. Higher oil prices would also incentivize more U.S. oil production.
“Removing export restrictions would increase domestic production—8 million barrels per day in April 2014—because of increasing domestic crude oil prices,” GAO said. “Estimates range from an additional 130,000 to 3.3 million barrels per day on average from 2015 through 2035.”
Environmentalists have criticized allowing increased oil exports on the grounds that it would exacerbate global warming and possibly lead to more oil spills as the fuel is shipped around the world. They argue that allowing oil exports, along with natural gas exports, would increase the amount of hydraulic fracturing, or fracking, used to extract oil and gas — one of the main practices environmentalists are bent on stopping.
Stephen Kretzmann, head of Oil Change International, said that lifting the oil export ban would be “climate denial in a new, and very dangerous, form.“ He told the news site Responding to Climate Change that only “climate deniers such as the oil industry and their paid Representatives on Capitol Hill would propose lifting the crude oil export ban.”
Many environmentalists argue that two-thirds of the world’s fossil fuel reserves have to stay in the ground if the world is to avoid catastrophic global warming. This claim, however, has been disputed since fossil fuel use has grown significantly in the last two decades, all while global temperatures stopped warming.
Though GAO did warn that increasing oil exports could come with environmental risks. The agency said more “crude oil production may pose risks to the quality and quantity of surface groundwater sources; increase greenhouse gas and other emissions; and increase the risk of spills from crude oil transportation.”
But so far, there has been no confirmed case of fracking causing water contamination. Places where there have been harms to water supplies have been limited and caused largely by faulty well casings and other failures not related to the fracking process.
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