The 114th Congress's first energy policy priority-after approving the proposed Keystone XL crude oil pipeline-should be repealing the ban on US crude oil exports, the American Petroleum Institute believes. It also acknowledges that reaching this goal won't be easy.
The main problem is that two major crude supply interruptions in the 1970s (and motorists lining up to buy gasoline at higher prices as a result) made a very strong impression on voters. They don't want to see it happen again, even if many of them didn't experience it directly but heard about it from their parents and grandparents.
"Our biggest challenge is convincing people that this is not 1978," American Petroleum Institute Chief Economist John C. Felmy told reporters on Jan. 13. "It's an economic-not a national security-issue now."
Proponents and opponents agree that possibly higher retail gasoline prices are the single biggest obstacle to winning broad support for removing a US crude export ban, which has been in place since 1975. Sales to Canada and from the Trans-Alaska Pipeline System have been allowed since.
The US crude oil supply outlook changed dramatically when hydraulic fracturing and horizontal drilling made it possible to recover crude from tight shale formations. Production, not imports, has grown in recent years.
"There isn't a single credible economist who believes allowing more crude
exports would raise prices at the pump now," said Kyle Isakower, API's vice-president for regulatory and economic policy, who also participated in the luncheon briefing.
It would reduce estimated consumer costs $5.8 billion/year from 2015 to 2035; result in another $15-70 billion of investment in US crude E&P from 2015 to 2020; and increase US crude production by 110,000-500,000/b/d, according to a study ICF International and EnSys Energy did for API.
Trimming deficit, adding jobs
The study also said that lifting crude export restrictions could reduce the US trade deficit $22 billion by 2020. "Every $1 billion improvement in the deficit translates into 5,000 jobs," Felmy observed.
API Upstream Operations Director Erik Milito said no projections show the country moving back into domestic supply scarcity any time soon. "Technology continues to move the industry," he said. "The fracing we see now is different from 5 years ago. Companies can go back to wells they've already drilled and increase recovery rates from 20% to around 35%."
The three API officials conceded that individual refiners and chemical companies could face higher supply prices because of their unique situations. Federal lawmakers also have been reluctant to propose repealing the ban, Milito said. "We're pretty confident congressional leaders will take a closer look once we get the story out," he added.
