NEW YORK (AP) — Exporting more U.S. crude around the world would lower the price of gasoline for U.S. drivers and benefit the U.S. economy, according to a new study released Tuesday.
While the conclusion may be counter-intuitive, the reasoning is straightforward: Exports would encourage more U.S. oil production and put that crude on the global market. That would lower the global price of oil, the price that is linked most closely to the price of gasoline in the U.S.
Exports of U.S. crude oil have been banned, with few exceptions, since soon after the 1973 Arab oil embargo.
Other studies have reaches similar conclusions. This latest study, released Tuesday, was conducted for the Brookings Institution by NERA Economic Consulting.
The study was introduced by former Obama adviser Larry Summers, who made a forceful case for removing the export restrictions as soon as possible. Summers said the decades-old restrictions serve no purpose now and that oil exports would add jobs, improve the nation’s geopolitical standing, and generate desperately-needed economic growth.
“We shouldn’t have prohibitions without a reason,” he said. “We need all the economic benefits we can get.”
The study calculates that pump prices would fall 2 cents to 12 cents per gallon on average, depending on how much oil is ultimately found and when the export restrictions are lifted, because oil prices would fall.
“Lifting the export ban would remove an artificial barrier to crude oil production,” the study’s authors conclude. “The result would be lower crude oil prices worldwide.”
The overall U.S. economy would benefit from more oil-producing jobs, higher wages, and consumers spending the money they save on gasoline on other products, the authors conclude.
Delaying a decision on the ban, the authors say, would eliminate nearly all the potential benefits.
U.S. crude exports are allowed only with special federal approval, the result of restrictions put in place after the 1973 Arab oil embargo. The rules went largely unchallenged for decades because oil production in the U.S. was slipping while demand was rising, so few thought the U.S. would be in a position to export oil.
The U.S. still uses far more crude oil than it produces. But domestic oil production is booming in North Dakota, Texas and elsewhere thanks to improved drilling techniques. The oil being produced is a variety of crude that foreign refineries covet and that many U.S. refineries are not equipped to handle. Oil producers and some politicians have called for the export ban to be lifted.
Opposition to exports of crude comes from U.S. refiners who benefit from lower-priced U.S. crude and some politicians. They argue that lifting the ban would raise U.S. crude prices, making it less profitable for domestic refiners to produce fuel. They would then reduce production, and U.S. gasoline prices would rise.
A growing number of studies have called that into question, however. The conclusions of the Brookings report are similar to a study funded by the oil industry and performed by the research firm IHS in May and a February paper by Resources for the Future, a non-profit research group that receives funding from government and private foundations.
A survey of private, corporate and academic economists conducted by the Associated Press earlier this year found overwhelming support for oil exports. Ninety percent of the 30 economists surveyed said the economy would be better off if oil exports were allowed.
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