Lifting U.S. crude export ban could boost production, cut gas prices: study

January 16
4:14 AM 2015

Lifting U.S. crude export restrictions could boost domestic oil production and cut gasoline prices, according to a report issued Friday by Columbia University's Center on Global Energy Policy.

The shale boom has flooded U.S. oil refiners with increased volumes of light sweet oil, which they are not generally configured to run. If rapid oil output growth continue without new demand for the crude, the pace of investment will fall, slowing future output, the study's authors said.

Modifying or lifting export restrictions would prevent this from happening by allowing domestic producers to compete globally, said the study's authors, the director of Columbia's center, Jason Bordoff and Trevor Houser, a partner with the Rhodium Group.

The study is the latest to support proponents of reversing the ban. Previous export studies, including one by the U.S. Energy Department, have found gasoline prices would fall if the ban is lifted. The report is the first to consider the export ban in light of the second-worst oil price slump on record.

"The oil price collapse has probably pushed out a bit the point at which the U.S. system is saturated with light crude," Bordoff told Reuters. "But directionally easing U.S. export restrictions would likely lift production and lower gasoline prices."

Reversing the restrictions could increase U.S. crude production up to 1.2 million barrels per day on average between now and 2025, the study found. Domestic gasoline prices could drop as much as 12 cents per gallon as a result of the policy change, according to the study.

"When export restrictions start distorting markets on a persistent and significant basis depends on the future rate of U.S. crude production growth, the ability to further displace imports, and the ability to expand exports currently allowed under U.S. law," the report said.

The original rationale for crude export restrictions no longer is supported, according to the study. Congress mandated the ban following the Arab oil embargo of the 1970s, which raised fears of shortages.

The export policy has remained unchanged even as the market has shifted dramatically, with U.S. crude oil production taking off aided by the combination of hydraulic fracturing and horizontal drilling which companies began to use widely in 2010 to unlock oil reservoirs.

Changing the export policy would not raise gasoline prices, as detractors argue, the study found.

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