Blog Post

The GAO Report: Competition of Oil Export Ban Studies

Today, the U.S. Government Accountability Office (GAO) released a report that reviews four studies about lifting the ban on U.S. crude oil exports—those by RFF, ICF International and EnSys Energy, IHS Global Insights, and NERA.  According to the GAO's summary, these studies estimate that U.S. crude oil prices would increase by about $2 to $8 per barrel—bringing them closer to international prices. At the same time, the gains in U.S. crude oil prices would boost world supplies of crude oil and reduce U.S. prices for gasoline, diesel, and other consumer fuels (which follow international prices).

According to the RFF study, lifting the ban on U.S. crude oil exports will allow crude oil prices in the Midwest to rise to international levels, which will stimulate Midwestern and Canadian crude oil production.  In addition, lifting the ban will improve the efficiency of international refinery operations by allowing the lighter crude oil produced in the United States to go to foreign refineries and the heavier crude oil produced abroad to come to U.S. refineries (which are better equipped to handle the heavier crude).  The increased production of crude oil and the improved efficiency in refineries will cause prices for refined products to fall.

Even without an improved refinery efficiency, the increased production of crude oil in the Midwest and Canada will mean that prices for refined products will fall, but just by not as much.

The GAO study provides a service by carefully comparing the four studies and showing that they basically reach the same conclusions using very different models.  Since those four were completed, several other studies of lifting the ban on U.S. oil exports have been done, such as those by Brookings and Aspen Institute (the latter focusing only on the economic effects).  Those studies come to similar conclusions, as well.

The GAO report goes beyond all of these studies by considering the implications of lifting the ban on exporting crude oil from the U.S. strategic petroleum reserve (SPR).

We agree that the SPR should be rethought.  We would like to see discussion not only of the size of the reserve and other design issues, but also of the meaning of the reserve given the greater integration of North American energy markets that we expect in the future, especially in light of recent Mexican energy reforms.