Government report: Gasoline prices won’t climb if U.S. exports its oil

WASHINGTON — A new government report buttresses companies campaigning to sell their crude around the world by debunking two of the most common complaints about widespread oil exports.

The analysis released Tuesday by the Energy Information Administration concludes that crude exports would not increase U.S. gasoline prices — and might even reduce them — while asserting that domestic refiners would enjoy a significant advantage over foreign competitors no matter what happens to the longstanding oil trade restrictions.

But the EIA analysis also throws some cold water on the entire pro-export crusade, suggesting that widely selling U.S. crude abroad might do little to boost either domestic oil prices or production. Executives from oil companies that have laid down rigs and cut jobs amid falling crude prices have sometimes cast exports as a kind of healing balm for the sector.

In two of EIA’s four scenarios, including its baseline “reference case,” the agency predicts removing export restrictions would not increase oil prices at the wellhead or result in greater domestic crude production. However, the Energy Information Administration predicts export restrictions would become a binding constraint if U.S. production were to reach 13.6 million barrels per day in 2025 (well beyond current forecasts of 9.4 million barrels per day for 2015).

Related story: Ad campaign launched to pressure senators on oil exports

The study itself is predicated on a host of assumptions about U.S. crude processing capacity and how other countries would respond to new American crude entering world markets. The EIA notes that its models “generally reflect an assumption that increases in U.S. crude oil production are partially offset by lower crude production outside the United States.” But if other petroleum producing nations — including OPEC member nations — refused to choke off some of their own production in response to U.S. exports, global crude prices would fall even further than predicted.

The report also notes that no matter what happens to the oil export ban, global price drivers unrelated to U.S. trade policy ultimately will play a big role affecting domestic production.

But the EIA presents its clearest picture on petroleum product prices, predicting that gasoline costs would not climb in any of its four scenarios. Gasoline and other refined petroleum products can be freely exported under the current trade policy, which limits exports of most raw, unprocessed crude.

“Petroleum prices in the United States, including gasoline prices, would be either unchanged or slightly reduced by the removal of current restrictions on crude oil exports,” the EIA says.

The finding echoes an earlier EIA analysis pegging gasoline prices to those of world crude (and not discounted U.S. oil). It also dovetails with several third-party reports that have predicted a modest decline in U.S. gasoline prices if widespread oil exports helped narrow the difference between higher-priced international Brent crude and its discounted domestic counterpart, West Texas Intermediate.

Some U.S. refiners have been fighting to preserve the export ban. They argue U.S. oil exports could disadvantage domestic refineries reliant on waterborne cargoes of crude (and, under the Jones Act, on U.S. flagged and crewed ships to transport the oil).

But the EIA asserts that “with or without current crude oil export restrictions, domestic refiners are also expected to maintain a significant advantage compared to offshore refiners.”

Even with the potentially higher cost of U.S. crude shipped in Jones Act-compliant tankers, the EIA notes refineries would benefit from “the continued projected availability of low-cost domestic natural gas, which is used as both a fuel and feedstock.”

A coalition of refiners that oppose oil exports took a dim view of the analysis.

“The EIA report is riddled with caveats, conditions, and uncertainties, so it has little usefulness for policymakers,” said Jay Hauck, executive director of Consumers and Refiners United for Domestic Energy.

Hauck added that two earlier third-party reports say gasoline prices are lower when the ban is intact.

“The uncertainty shown by the EIA demonstrates that crude exports are a risky policy experiment,” Hauck said. “The well-being of American families and businesses is on the line.”

Kyle Isakower, vice president of regulatory and economic policy at the American Petroleum Institute, said the EIA’s analysis “provides a final, non-partisan confirmation that ‘70s-era trade restrictions on U.S. oil are bad for American consumers.”

“The EIA report only reinforces the economic benefits of exports outlined in every other major study — more U.S. jobs, greater U.S. energy production, and downward pressure on fuel costs,” Isakower said.

Margo Thorning, senior vice president of the American Council for Capital Formation, said the report “should finally put to rest any concerns lawmakers may have about the impact allowing U.S. crude oil exports will have on American consumers.”

The EIA study released Tuesday is the latest in an ongoing series requested by Sens. Lisa Murkowski, R-Alaska, and Maria Cantwell, D-Washington, to help inform lawmakers grappling with the issue.

Oil producers lobbying for exports see evidence of building momentum on Capitol Hill, where Senate Democratic Leader Harry Reid recently said there was room for a “compromise” on the issue.

“We should sit down and try to work something out with the people who are so focused on exporting it and those people who are so focused on not exporting it and come up with a deal,” Reid told Politico.

And Sen. Robert Menendez, D-N.J., a longtime oil export critic, highlighted the possibility of strategically using foreign crude sales as a geopolitical tool to bolster a new round of nuclear negotiations with Iran.

Read more: Democrat floats strategic crude exports

The House of Representatives could vote on legislation to lift the export ban later this month, but the prospects are murkier in the Senate, where a stand-alone export bill is unlikely to be brought to the floor independent of other issues.