Opening additional markets for U.S. crude oil will benefit consumers
As prices at the gas pump go up, the money in Americans’ pockets decreases, while lower prices per gallon mean more disposable income for Americans.
One method to consistently decrease these prices could provide consumers with up to $5.8 billion in additional disposable income per year by exporting U.S. crude oil, according to research by ICF International.
North America is experiencing an unprecedented surge in oil and natural gas production, and large-scale production of shale resources has spurred an energy renaissance. But U.S. consumers don’t buy crude oil; they buy refined oil products such as gasoline and diesel fuel. And the cost of consumer products is based on the global crude price, not the discounted domestic price per barrel. Since U.S. crude cannot be exported, Americans do not enjoy all the potential benefits of this abundant resource.
“According to the Energy Information Administration, removing the ban will increase the supply of oil on the world market, bringing the price of crude down globally, which will bring down the price of gasoline and other fuels for consumers,” said Senator John Hoeven (R-ND) in a recent Senate session introducing bipartisan legislation to lift the ban.
It’s a basic economic principle that increased supply leads to decreased prices. U.S. consumers have enjoyed lower prices at the pump recently due to the decrease in global crude oil prices. And that recent downtick in price at the pump could be magnified if American crude oil were allowed to increase global supply. Yet for the last 40 years, a ban has prevented the country from exporting its crude oil.
“For generations, Americans have been subject to the whims of OPEC and its impact on the world oil market. Americans pay more at the pump whenever the world’s supply decreases —whether that is a result of events close to home or decisions made on another continent,” said Senator John Barrasso (R-WY) in the same Senate session.
The price consumers pay at the pump is determined by a number of factors, but about half the cost is based on the global price of crude oil per barrel, not the cost of domestic crude. Lifting the export ban would result in an influx of American oil into the global market, which would decrease that price and result in lower prices for consumers.
“We could be a stable supplier of crude to the global markets,” said Ryan Lance, chairman and CEO of ConocoPhillips. “If you want to reduce the cost of gasoline to U.S. consumers, put oil into the market to stabilize the global price.”
Analysis by about a dozen government entities and energy-related firms concluded that gasoline prices would decrease if crude oil exports are permitted. The Congressional Budget Office stated that U.S. consumers of gasoline, diesel fuel and other oil products, as well as oil producers, would likely benefit from a repeal of the ban.
“We have an opportunity to not only keep the U.S. energy renaissance momentum going, but also to help ensure that Americans can realize all the potential benefits it has to offer. The ban on U.S. crude oil exports should be removed,” Lance added.
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