Amid an ongoing debate over whether Congress should remove the restrictions it placed on crude oil exports in response to the Arab oil embargo in the 1970s, the Government Accountability Office released this week a report finding that doing so could benefit consumers and lower the federal trade deficit. The report also recommends a comprehensive reevaluation of the appropriate size of the Strategic Petroleum Reserve, which was established to release oil to the market during supply disruptions and protect the U.S. economy from damage, in light of current and expected future market conditions.
The GAO states that the studies it reviewed and the stakeholders it interviewed generally suggest that removing crude oil export restrictions may have the following implications.
– increasing domestic crude oil prices by reducing domestic supply
– increasing world supplies of crude oil, which could reduce international prices and subsequently lower consumer fuel prices
– increasing domestic production (by 130,000 to 3.3 million barrels per day) because of increasing oil prices
– increasing the size of the U.S. economy, with implications for employment, investment, public revenue and trade (e.g., further declines in net crude oil imports would reduce the U.S. trade deficit)
– posing risks to the quality and quantity of surface groundwater sources, increasing greenhouse gas and other emissions, and increasing the risk of spills from crude oil transportation
However, the report cautions that estimates of the effects of removing export restrictions are uncertain due to several factors, including the extent of U.S. crude oil production increases, how readily U.S. refiners are able to absorb such increases and how the global crude oil market responds to increasing U.S. production.