EIA On Board With Lifting U.S. Crude Export Ban
A new report from the Energy Information Administration adds more weight to the notion that crude oil exports from the U.S. would not damage the economy.
The EIA studied the prospect of oil exports in response to questions from Congress, and it builds on several prior reports completed by the agency over the past year and a half. The report is full of caveats and other drawbacks, but the headline takeaway could fuel political momentum to remove the export ban.
According to the results, the EIA believes that if U.S. oil production remains below 10.6 million barrels per day through the next decade, there would be few differences between leaving the export ban in place versus removing it. If production is set to rise beyond that level, however, removing export restrictions would have several effects: higher domestic oil production, higher crude exports, slightly lower gasoline prices, but also lower refined product exports.
Digging into the findings, the EIA says that if the export ban stays in place it would have the effect of maintaining the current discount at which WTI trades relative to the Brent crude marker. Moreover, if U.S. oil production increases, the spread between WTI and Brent would only widen, perhaps as high as $10 per barrel under one scenario. And that spread would increase in corresponding fashion the more U.S. oil production increases.
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Of course, removing the export ban would shrink that spread, allowing for higher oil prices at the wellhead for American oil and gas drillers. That would incentivize more drilling, leading to higher oil output than would otherwise occur under the export ban.
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