- The original rationale for crude export restrictions no longer applies. Today’s oil market looks very different than in the 1970s when current crude oil export restrictions were first put in place. At that time, the US had adopted domestic price controls to combat inflation and crude export restrictions were necessary to make those price controls effective. While price controls have long since fallen away, crude export restrictions remain.
- If recent production growth rates continue, a shortage of US light crude refining capacity will likely reduce domestic crude prices relative to international levels, slowing the pace of upstream investment and future crude output. Modifying or removing crude export restrictions would prevent this from occurring by allowing domestic producers to compete in global markets.
- Permitting companies to export crude oil in greater quantities may reduce the rents refiners receive relative to leaving current restrictions in place, but will likely decrease the price Americans pay for gasoline, diesel and other petroleum products and benefit the US economy as a whole.
- While the nature of the impact of lifting crude export restrictions is relatively clear, the timing and magnitude is highly uncertain. The recent decline in oil prices will slow the pace of US production growth and may delay the point at which domestic light crude refining capacity shortages occur. The speed and cost at which refiners could add or re configure capacity is unknown, as is the response of producers elsewhere in the world to any change in US supply.
- In light of these and other variables, we estimate lifting current crude export restrictions could increase US crude production anywhere between 0 and 1.2 million barrels per day on average between now and 2025, and reduce domestic gasoline prices by between 0 and 12 cents per gallon.
- Allowing exports would make the US more resilient, not less, to supply disruptions elsewhere in the world. Greater integration into global markets would make US oil supply more responsive to international market developments, mitigating the impact on American consumers and the US economy of production losses in other countries.
- Lifting crude export restrictions is consistent with past and present US trade policy priorities, would enhance US credibility in current and future trade negotiations, and avoid creating a precedent that could harm US trade policy objectives down the road.
- Increased US crude production can weaken the economic power, fiscal strength and geopolitical influence of other large oil producing countries. The magnitude of any export policy-driven impact is small, however, relative to recent oil market developments. More important for US foreign policy are the current crude trade relationships retained and new ones created if export restrictions are modified or lifted, along with the potential for greater US diplomatic leverage in future application of sanctions or pursuit of other objectives.
- To the extent allowing exports lowers crude oil and petroleum product prices, global oil demand will increase, along with oil-related CO2 emissions. While we do not believe export restrictions are an appropriate or cost-effective way to reduce CO2 emissions, it is critical that more aggressive policy actions in other areas are taken to demonstrate that boosting domestic supply can be consistent with meeting our climate objectives.
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