IHS Study Shows Lifting Ban On Oil Exports Is Beneficial

IHS notes that the U.S. crude oil supply chain is a vast network of interconnected suppliers of labor, com­modities, and information reaching into communities and industries across the nation. It is highly capital intensive and includes firms in industrial equipment and machin­ery, construction and well services, information technol­ogy, logistics, materials, and the professional, financial, and services sectors. Removing the crude oil export ban would have a dramatic impact across the U.S. on supply chain jobs, income, and government revenue. The breadth of these impacts reflects the capital intensity of the oil industry and its reliance on inputs from a vast network of domestic goods and services suppliers around the country.

The study, “Unleashing the Supply Chain: Assess­ing the Economic Impact of a U.S. Crude Oil Free Trade Policy,” finds that the increased supply chain economic activity resulting from the rise in crude oil production would support an average of 124,000 additional U.S. jobs over 2016-2030, with highs of 250,000 additional jobs supported in 2017 and a peak of 293,000 jobs in 2018. Removing the export restriction would also fuel gross domestic product (GDP) and household income. The crude oil supply chain would add $26 billion to GDP per year and improve labor income by about $158 a year, on average, for each household.

The energy supply chain encompasses all 50 states, but sizes and populations vary widely, IHS comments. To further quantify the breadth of the supply chain, impacts of lifting the export ban were estimated for each U.S. con­gressional district, as well as for each state. Lifting the ban supports supply chain activity across all states and nearly all congressional districts. The benefits vary, not only by whether each area produces crude oil, but also by the level of diversity and integration of the local crude oil supply chain.

Earlier research by the consultancy found that lifting the 1970s-era export restrictions on U.S. crude oil would lead to further increases in domestic oil produc­tion, resulting in lower gasoline prices while supporting nearly one million additional jobs at the peak. “The U.S. oil system is nearing gridlock, with the mismatch between the rapid growth of light, tight oil and the inability of the U.S. refining system to economically process these grow­ing volumes,” researchers said. “Lifting the export ban and allowing free trade will, in our base case, increase U.S. pro­duction—from 8.2 MMbbld currently to 11.2 MMbbld—and add investment of nearly $750 billion. The resulting increase in domestic oil production would be so great that it would cut the U.S. oil import bill by an average of $67 billion per year.”