By July 8, 2015 Read More →

Lift American crude oil export ban now – Porter to Ag Committee

Crude oil export ban costs jobs, investment in Texas, other energy-producing states

The American crude oil export ban is damaging the Texas economy and should be lifted immediately, Railroad Commission Chairman David Porter testified before the U.S. Agriculture Committee Wednesday.

crude oil export ban

David Porter, Commissioner, Texas Railroad Commission.

Porter emphasized how lifting the ban on crude oil exports would spur new American energy production, foster economic growth and provide direct benefits to rural America and the nation as a whole.

The Texas Railroad Commission has recently seen a dramatic drop in the number of issued drilling permits – from 2,389 in May of 2014 to only 916 as of May this year.

“In Texas, we understand and experience firsthand the link between U.S. oil and natural gas production and the strength of the economy,” Porter said.

“The two are inextricably linked. When oil prices recently dropped, we felt the economic impacts at home. We saw thousands of hardworking men and women put out of work and rigs idled.  We saw state revenues – used to support schools and infrastructure investments – decline.”

Porter also cited recent studies from the University of Houston and Rice University, which report that each drilling rig represents a total of 224 jobs, including those on the rig itself and those across the supply chain and in the broader economy.

“With the loss of 1,072 rigs through June, you can do the math to see just how devastating the recent downturn in development has been for oil and natural gas producing states,” Porter said.

“It comes to roughly 240,000 jobs. While repealing the ban will not bring back these jobs overnight, it will certainly get some of these men and women back to work in the near term.”

Porter also highlighted that the crude oil export ban is responsible for the disparity between West Texas Intermediate (WTI) – the U.S. pricing benchmark for crude – and the international benchmark, Brent:

“The majority of the new oil being produced from our shale formations is light sweet crude and the U.S. refining capacity is not designed to economically handle the increased volumes of this type of crude. As a result, our oil is essentially trapped in the U.S., creating a supply glut that is driving down the price of U.S. oil.  This represents billions of dollars of lost revenue that could be pumped back into the U.S. economy.”

More Porter testimony:

The best way to put people back to work and address the glut of light sweet crude oil is to allow it to be exported to the world market. Earlier this year, the Texas State Legislature passed and Governor Abbott signed a resolution asking Congress to lift the ban on crude exports. It notes the multiple benefits it would bring to Texas and the U.S.

First, lifting the export ban would increase production here at home, resulting in new American job creation, economic growth and increased state and federal revenue. According to a study by ICF International, it’s estimated that U.S. GDP would increase by $38.1 billion in 2020 if expanded crude exports were allowed. The same study also noted that U.S. federal, state, and local tax receipts attributable to this GDP increase could reach $13.5 billion in 2020.

While large producing states like Texas would immediately feel the job-creating benefits, studies show that nearly every state and congressional district would also benefit from increased oil production due to the expansive supply chain it supports. According to IHS Energy, for every energy job created in oil production, three jobs are created in the supply chain and six more in the broader economy.

Second, lifting the export ban would help consumers save money at the pump. Domestic gasoline prices are based on the international price of oil. Therefore, increasing the global supply of oil would lower international oil prices and ultimately help lower the price of domestic gasoline. According to Columbia University, domestic gasoline prices could be reduced by up to 12 cents a gallon if the ban were lifted.

Lower fuel prices would be especially beneficial to farmers and rural Americans. As you are aware, agriculture is an energy-intensive industry and rural Americans spend more money on fuel as a percentage of their income than urban residents. Lower gasoline prices would provide a significant economic boost for many of these families and small businesses.

Third, lifting the ban will enhance free trade and lower the U.S. trade deficit. The U.S. exports all types of goods and commodities, from fruits and vegetables, to cars, to computer software. In addition, the federal government also allows for unlimited exports of refined products, such as gasoline, diesel fuel and jet fuel. Why should U.S. crude oil be treated any differently? A study by Columbia University rightly noted that “crude export restrictions are inconsistent with the U.S. enjoying the benefits of petroleum trade and the U.S. commitment to free and open markets.” Allowing U.S. crude oil exports will also help lower crude oil imports, thereby lowering the trade deficit. According to ICF International, crude oil exports could narrow the U.S. trade deficit by $22.3 billion in 2020.

Finally, lifting the crude oil export ban will strengthen our national security and help our global allies. While I’m not a foreign policy expert, I will take the advice of those who are and encourage others to do the same. Former Defense Secretary Leon Panetta, former Defense Secretary William Cohen and former National Security Advisor Stephen Hadley all agree that our security interests around the world would be strengthened by allowing U.S. crude oil exports. The U.S. can become a stable supply source for our allies, help prevent market distortions and lower the influence of OPEC.

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