Since the early 1970s the U.S. has had a ban in place on the export of crude oil. The ban was originally enacted to protect the U.S. supply of crude in response to decades of declining domestic production and issues in the international oil market during the 1970s.
Yet in recent years these concerns have become obsolete as the U.S. is now experiencing a renaissance in the production of crude thanks in part to improvements in extraction and exploration methods. In fact since 2008 U.S. crude output has increased a whopping 64 percent.
This massive increase in crude production has the potential to: reduce U.S. gas prices; create hundreds of thousands of new jobs; increase GDP; increase household incomes; and reduce the U.S. trade deficit.
However all of these benefits are contingent on whether Congress will act to lift the decades old ban on crude exports.
1. Lower U.S. Gas Prices. Lifting the export ban would increase global crude supplies, in turn lowering global prices. Lower global prices would put downward pressure on domestic prices reducing the price Americans pay at the pump. A recent IHS report found lifting the ban would reduce gasoline prices 8 cents a gallon thereby saving drivers $265 billion over the next 15 years.
2. Job Creation. As a result of increased economic activity from lifting the ban, average U.S. job creation is projected to reach up to 859,000 new jobs. Additionally, U.S. job creation resulting from lifting the ban is estimated to peak in 2018 at between 1 million and 1.5 million new jobs.
3. Increase Economic Growth. A recent study by the Government Accountability Office (GAO) found lifting the ban would increase the “size of the economy…employment, investment, public revenue, and trade.” This finding was echoed by similar studies that project lifting the ban would increase U.S. GDP by $73 billion in 2016 with an additional increase of $134 billion in 2018.
4. Increase Household Income. Due to the increased investment, job creation and low gasoline prices resulting from lifting the ban on crude exports, average disposable income per household would increase by $391 in 2018. A recent study by the Aspen Institute further found that real household income would increase up to $3,000 per household by 2025.
5. Reduce U.S. Trade Deficit. Allowing crude exports would also have a profound and positive impact on the U.S. trade deficit. Lifting the crude export ban would contribute to expanded U.S. exports. Such expansion is projected to narrow the U.S. trade deficit by $22.3 billion in 2020 through increased international trade of U.S. crude.
Photo Credit: Bridget Coila