Kyle Isakower's remarks at press conference on crude oil exports
As prepared for delivery
Press Conference on Crude Oil Exports
Kyle Isakower, API Vice President for Regulatory and Economic Policy
Monday, March 31, 2014
Opening statement, as prepared for delivery:
Good morning and thank you for joining our call today.
This morning, API is releasing a new study on the economic implications of lifting the trade restrictions that prevent exports of U.S. crude oil to global markets.
To date, this is the most detailed analysis available on the specific employment, GDP, trade, revenue, and consumer impacts of crude exports. And it paints a compelling picture.
Consumers are among the first to benefit from free trade, and crude oil is no exception. Gasoline costs are tied to a global market, and this study shows that additional exports could help increase supplies, put downward pressure on the prices at the pump, and bring more jobs to America.
Access to foreign customers could drive significant investment in U.S. production, helping to strengthen our energy security. Now that the U.S. is poised to become the world’s largest oil producer, the economic case for exports is clear.
For economists, the results will come as no surprise. The analysis -- conducted by ICF International and EnSys Energy on behalf of API -- confirms the benefits that have already been suggested by a number of other reports.
ICF’s analysis reaches several key conclusions:
Crude exports could yield consumer savings of up to $5.8 billion per year, on average, between 2015 and 2035.
If current restrictions were lifted, the cost of gasoline, heating oil and diesel fuel could fall by as much as 3.8 cents per gallon in 2017, dropping as much as 2.3 cents per gallon, on average, from 2015 to 2035.
In addition, the economy could gain up to 300,000 additional jobs in 2020, both due to higher oil production and U.S. consumers having more money in their pocket to spend on goods and services.
Domestic oil production could rise by as much as 500,000 barrels per day in 2020, and the trade deficit could fall by $22 billion the same year.
In total, the economy could grow by as much as $38 billion in 2020, with an average GDP increase of up to $27 billion annually through 2035.
An additional $15 to $70 billion could be invested in U.S. exploration, development, and production between 2015 and 2020.
And finally, federal, state, and local government revenues could rise by as much as $13.5 billion in 2020.
Harnessing these benefits, however, will require lawmakers and regulators to reexamine policies that were enacted long before the U.S. transitioned from a period of energy scarcity to our current position: one of energy abundance.
Today, we’re producing nearly 50 percent more oil than we did in 2008. By 2015, the International Energy Agency predicts the U.S. will surpass Saudi Arabia and Russia to be the world’s top crude oil producer.This is a new era for American energy, but our energy trade policies are stuck in the 1970s. The U.S. and China are the only major oil producers in the world that don’t export a significant amount of crude. It’s time to unlock the benefits of trade for U.S. consumers and further strengthen our position as a global energy superpower.
Our industry also believes it’s important that we work holistically to modernize America’s energy infrastructure and facilitate the efficient flow of resources from producer, to refiner, and to customer.
As Energy Secretary Moniz noted last year, America’s energy policies “deserve some new analysis and examination in the context of what is now an energy world that is no longer like the 1970s."
The study is part of that analysis. And it corrects some of the misperceptions about the energy market that are often repeated by critics of free trade. Chief among those is the impact on consumers.
Consumers don’t buy crude oil. They buy fuel. And the prices of refined products – like gasoline – are set by a global market.
A temporary glut of oil in one region doesn’t significantly lower consumer costs, because gasoline is eligible for trade after the oil is refined. And, in the long-run, any oversupply of unrefined crude may create a disincentive to produce more energy here at home.
But if oil can flow to the global market, then you begin to see higher global supplies, more production, and consumer-level benefits – as well as more American jobs.
Trade also increases efficiency. For example, the U.S. is a growing producer of light, sweet crude. But our refining capacity is largely designed to accommodate heavy crude.
Often, it makes sense to export a surplus of expensive, light oil from one region and import cheaper, heavy oil in another – rather than ship more expensive oil cross-country. This is especially true in the absence of sufficient infrastructure to efficiently transport crude to the refineries that could use it. But export restrictions effectively insulate consumers from the positive benefits of efficient markets.
This study shows what would happen if we tore down those barriers – economically.
Of course, there also are strategic reasons to increase U.S. energy exports.
As General Martin Dempsey, Chairman of the Joint Chiefs of Staff, recently said, “An energy independent and net exporter of energy as a nation has the potential to change the security environment around the world – notably in Europe and in the Middle East.”
As we grow as an exporter, U.S. energy leadership has the potential to bolster America’s allies, expand our geopolitical influence, and strengthen the global energy market against future disruptions.
However, the first step is lifting our own self-imposed restrictions.
And, as we can see in today’s study, the benefits will flow first to consumers and workers here in the U.S., where the argument in favor of free trade is undeniable.
Now, I’d be happy to take your questions.