NEW YORK, N.Y. – Whether to allow more exports of U.S. oil and natural gas has become a matter of political debate in Washington. But to economists, the answer is clear: The nation would benefit.
The vast majority of economists surveyed this month by The Associated Press say lifting restrictions on exports of oil and natural gas would help the economy even if it meant higher fuel prices for consumers.
More exports would encourage investment in oil and gas production and transport, create jobs, make oil and gas supplies more stable and reduce the U.S. trade deficit, they say.
As domestic energy production has boomed, drilling companies have pushed to be allowed to sell crude oil and natural gas overseas, where they can command higher prices. Such exports are restricted by decades-old energy security regulations.
Those opposed to opening trade say exports could make it more expensive for Americans to heat their homes and fill up their cars.
But even economists who think exports might increase fuel prices for U.S. consumers — an open question — say the overall benefit to the economy would outweigh any possible harm. It would be better to allow the exports and use tax breaks or other methods to help those struggling with higher prices, they say.
“The economy in general is better off if we can sell something to someone and bring money into the economy,” said Jerry Webman, chief economist at Oppenheimer Funds. “I’d rather deal with any side effects directly than limit our ability to do business with the world.”
The AP survey collected the views of private, corporate and academic economists on a range of issues. Of the 30 economists who participated, nearly 90 per cent responded that more exports of oil and gas would help the U.S. economy.
Oil and gas export restrictions went largely unchallenged for decades because consumption in the U.S. — by far the world’s biggest consumer of oil and gas — was rising while production was falling. Imports were increasing, and few thought the U.S. would ever be in a position to export oil or gas.
But new techniques have allowed drillers to tap oil and gas in formations once thought out of reach, and U.S. production has soared.
The U.S. still consumes far more crude oil than it produces. But oil companies are producing a light sweet crude that foreign refineries covet and that many U.S. refineries are not equipped to handle. The companies and some politicians have called for lifting oil export restrictions. Proponents concede, though, that that’s unlikely in an election year.
Seven terminals have received Energy Department approval to export natural gas and are at various stages of planning, permitting, finance and construction of the facilities needed to cool the gas into a liquid for transport. Thirty additional facilities are awaiting approval.
Low natural gas prices in the U.S. have helped reduce heating and electricity prices for residents and given U.S. manufacturers a cost advantage over their competitors in Europe and Asia.
That’s one reason Robert Johnson, director of economic analysis at Morningstar, doesn’t embrace the idea of unfettered natural gas exports.
“We’ve already got a few industries building on the concept that we’re going to have a long-term energy advantage here, and I’d hate to interrupt those plans,” Johnson said.
He also argues that higher energy prices would disproportionally hurt those with lower incomes, who spend a relatively large portion of their paychecks on energy. That leaves them with less cash for other things, which, in turn, hampers consumer spending — by far the biggest portion of the U.S. economy.
But it is far from clear that exports would raise fuel prices or eliminate the country’s competitive advantage. Natural gas is so expensive to liquefy and ship overseas that the delivered cost of U.S. gas will always be far cheaper in the U.S., where it can travel by pipeline, than it would be in Europe or Asia.
Exports are even less likely to affect prices of fuels made from oil, such as gasoline and diesel. U.S. crude oil prices have been about 10 per cent cheaper than global oil prices in recent years. But consumers don’t enjoy most of that benefit because exports of gasoline and diesel are not restricted.
Refiners have been able to buy cheaper oil in the U.S., which has helped lower their input costs. But they can then sell their fuels anywhere in the world, which allows them to fetch global prices, whether they sell to buyers in Boston or Bogota.
Jonathan Fahey can be reached at http://twitter.com/JonathanFahey .