It was easy to wonder if anything new could be said at the Center for Strategic and International Studies' June 9 forum about possible impacts of lifting the ban on US crude oil exports. Since it was a roomful of experts in Washington, the answer quickly became apparent.
The discussion centered on a report issued by IHS Energy in late May. Its authors frankly admitted they'd reached conclusions similar to those in two other groups' earlier studies: Lifting the ban would increase US crude production by 3 million b/d and add nearly $750 billion of investments. The increased global supplies would lower global oil and US gasoline prices. At its peak, higher US production would create 1 million jobs, and increase gross domestic product by $135 billion and average household income by $391.
"We're talking about an artifact of history that's still in place," IHS Vice-Chairman Daniel Yergin said. "What we're looking at is an archaic ban that's left over from an era that's long gone."
Constraints on free trade arising from the near-total export ban leave US producers with very deep discounts for their light, sweet crude which could eventually affect activity, warned Kurt Barrow, IHS's downstream and oil markets vice-president and one of the report's authors.
"It's not a good fit with the refining system we have," he said. "We're going to continue importing crude, but it will be the heavier, lower-cost sour grades for which our refining system is configured."
Kevin Book, who leads the research team at ClearView Energy Partners LLC, a Washington consulting firm, meanwhile, said, "There are economic gains in the future, but it's important to preserve the economic gains we've already achieved. It's impossible to ignore benefits to refineries of low gas prices as well as deep discounts for domestic light crude."
'A very new place'
Referring to the report's findings, Frank A. Verrastro, a CSIS senior vice-president who holds the James R. Schlesinger Chair for Energy and Geopolitics there, said, "This is the future as it could be, not necessarily as it will be. We're actually in a very new place."
Yergin said it was striking how stable global crude prices have been the last 3 years. "We're used to reality not keeping up with expectations," he said, adding, "In this case, expectations aren't keeping up with reality."
Consequently, it could take time for policymakers and the public to respond to this dramatically changed US oil and gas outlook, the panelists agreed. "We started this discussion a year ago," Verrastro said. "I think the administration is balancing all the benefits. People will become more comfortable with the new supply reality."
