Loosening the 39-year-old ban on oil exports probably wouldn’t push gasoline prices higher, a new report from Washington says.
That’s because prices at the pump respond to global prices not just American supply and demand, the U.S. Energy Information Administration analysis concluded Thursday.
“Because the United States is an active participant in the global petroleum market as both an exporter and importer of gasoline, U.S. gasoline prices are tied to global gasoline prices,” it said.
The finding has significant implications for fierce political debate over whether to relax or entirely scrap restrictions on crude oil exports, which were put in place in 1975 to combat the Arab oil embargo.
Democrats and Republicans have balked at allowing free trade in oil because the public fears it could cost them more every time they fill the tank. The law demands that crude oil be refined before being exported — shipping gasoline abroad is allowed — although minor exemptions allow some unprocessed crude to trickle into Canada.
The study supplies ammo to lawmakers who favor exports even though it says the “extent of any actual change” in production or prices is “beyond the scope” of the analysis. The EIA promises that it will produce a specific report on that issue.
The Obama administration has been guarded about export policy.
In a move seen by many as a significant policy change, the Commerce Department in June allowed two firms to export a type of light crude called condensate, so long as it was lightly processed. But the department has halted similar proposals, and Energy Secretary Ernest Moniz consistently notes that despite the domestic oil boom, the U.S. still imports more than 30 percent of what it consumes.
Still, the EIA said U.S. crude particularly, the light sweet variety from shale that domestic refineries cannot process, might fetch higher prices elsewhere. That might, in turn, raise domestic prices and prompt more drilling, more supplies and lower global prices.
Sen. Lisa Murkowski, R-Alaska, an early champion of exports, said the new findings helped make the case for ending the export ban.
“If domestic gasoline prices are tied to the Brent worldwide index price, then exporting U.S. oil to our friends and allies will not raise gasoline prices here at home and should, in fact, help drive down prices,” she said in a statement. Murkowski is the top Republican on the Senate Energy and Natural Resources Committee.
The study found that from 2010, bottlenecks stanching the flow of crude to refineries from shale wells in North Dakota and Texas led to a glut in crude, which depressed the price West Texas Intermediate, the benchmark US crude. At the same time, the price of Brent crude, the international benchmark, stayed high.
Gasoline prices responded to those Brent prices, the study notes. It means that a domestic oil glut lowered the price of American crude but the public did not get any price relief at filling stations.
“[T]he possibility that prices of domestic crudes, such as WTI, and international crudes, such as Brent, would move in opposite directions highlights the importance of understanding which type of crude drives U.S. gasoline prices, which may be the most salient petroleum product price for the public and many policymakers,” the study said.
