U.S. Should End Its Export Ban On Crude Oil, Study Says
RENEE MONTAGNE, HOST:
We have some economic news. A study finds consumers would benefit from a change in U.S. oil policy. The study examines the effects of ending the decade-long ban on exporting U.S. crude oil. There's been a ban since the Arab oil embargo of 1970s. NPR's John Ydstie reports.
JOHN YDSTIE, BYLINE: Jason Bordoff is a co-author of the study. He's a former energy adviser in the Obama White House and now directs the Columbia University Center on Global Energy Policy. He says convincing consumers and politicians to end the export ban on crude is not an easy sell.
JASON BORDOFF: People worry that allowing oil exports may lead to higher pump prices. Kind of intuitively, you might think we're sending our oil overseas, there's less for us or we'll have to pay more for it.
YDSTIE: But Bordoff says evidence and economic theory suggest that ending the export ban would put downward pressure on gasoline prices. The reason is that U.S. consumers haven't been getting the full benefit of low U.S. crude prices.
BORDOFF: Because the price consumers are paying for gasoline is being set by the world price of oil, not by the U.S. price.
YDSTIE: And during most of the past few years, the world price has been well above the U.S. price - as much as $20 a barrel higher. That happened partly because of a 60 percent surge in U.S. oil production that led to an oversupply of crude on the U.S. market that couldn't be exported. So a gap opened between the price of U.S. crude and the global price of oil. But U.S. consumers didn't see much benefit according to Bordoff.
BORDOFF: To the extent there's any discount on the U.S. price compared to the world price that is a benefit that accrues to refiners, not to consumers.
YDSTIE: So not surprisingly, says Bordoff, refiners are lobbying hard to continue the export ban.
BORDOFF: I think if you were a refiner, you'd rather buy your crude cheaper if you could.
YDSTIE: And independent oil refiners take issue with the collusion of Bordoff's study. Jay Hauck is the executive director of the organization called CRUDE.
JAY HAUCK: The oil export ban benefits consumers. It benefits businesses in the United States. It has very broad and deep support, and it also has a very strong national security component.
YDSTIE: Hauck points to a study by Barclays that argues that refiners did pass to consumers most of the savings they enjoyed from processing lower-cost U.S. crude in recent years. And Hauck says the export ban protects U.S. energy security.
HAUCK: It helps insulate the United States from volatility and unpredictable global crude markets.
YDSTIE: Including market manipulation by OPEC.
HAUCK: For us to simply unilaterally disarm seems unwise.
YDSTIE: But Bordoff argues that by lifting the export ban and becoming a bigger player in the oil market, the U.S. will gain influence over global prices. He also says lifting the ban would give the U.S. more credibility on global trade issues.
BORDOFF: Allowing traded energy is consistent with our past and our present U.S. trade policy priorities.
YDSTIE: The U.S. already allows exports of products like gasoline. And the Obama administration recently loosened the crude export ban a bit by allowing exports of lightly processed crude called condensate. But opposition from environmentalists who say lifting the ban would promote more fossil fuel use is constraining further White House action. Big oil producers have lobbied hard to eliminate the ban, but they're concerned they don't yet have enough support in the Congress to win. So a vote on lifting the ban on crude oil exports could be a ways off. John Ydstie, NPR News, Washington. Transcript provided by NPR, Copyright NPR.