By Laura Barron-Lopez - 10/30/14 04:55 PM EDT
The Energy Department’s top analysts said on Thursday that when it comes to U.S. gas prices, the most “important” determining factor is the international price of crude oil, not domestic oil.
While the report doesn’t take a side in the growing debate surrounding lifting the decades-old ban on crude oil exports, its findings support advocates who argue repealing the restrictions could lower gas prices.
That would also cause the domestic West Texas Intermediate (WTI) crude price to rise, essentially bringing Brent and WTI more into line.
And on the issue of gas prices for consumers, it's that Brent crude oil price that matters.
“Brent crude oil prices are more important than WTI crude oil prices as a determinant of U.S. gasoline prices in all four regions studied, including the Midwest,” the EIA states in the report.
“The effect that a relaxation of current limitations on U.S. crude oil exports would have on U.S. gasoline prices, would likely depend on its effect on international crude oil prices, such as Brent, rather than its effect on domestic crude prices,” the report adds.
The EIA notes however, that ability of crude exports to cause a drop in the global price of oil depends on a number of factors, and that there are caveats.
Price swings depend on how much exports affect the price recognized by U.S. producers, and the ability of refiners to react to domestic production.
Advocates of lifting the ban first imposed in the 1970s said the EIA report is evidence of a need for action.
“Numerous other studies have reached the same conclusions, but the EIA’s analysis carries great weight with policymakers, and it demonstrates that restrictions on U.S. exports do nothing to advantage gasoline consumers here at home,” said Erik Milito, director of upstream operations for the American Petroleum Institute.
Sen. Lisa MurkowskiLisa MurkowskiKerry visits Arctic Circle to see climate impacts Senate panel clears EPA spending bill, blocking rules Momentum slows for major energy bill MORE (R-Alaska), a leading voice in the Senate on crude exports, said the tie between Brent oil price and gasoline costs in the report shows “exporting U.S. oil to our friends and allies will not raise gasoline prices here at home and should, in fact, help drive down prices.”
Opponents of lifting the ban argue selling U.S. crude oil would increase gas prices for consumers at home and hurt refiners.
Sen. Ed Markey (D-Mass.) called proponents “irresponsible” for using the report to “draw larger conclusions about the impacts” exports would have at home.
“Lower U.S. oil prices are contributing to massive savings at the pump for consumers in some regions of the country,” Markey said. “Exporting American oil might be good for big oil’s bottom line, but it would harm American families and businesses, and erode our progress towards energy independence that enhances our national security.”
He added that EIA plans to study additional factors at play in allowing oil exports, and that additional work is needed to “fully inform any national policy debate.”
Talk of pulling back the restrictions has increased in Congress, but legislation to do so is not expected to pass in the next year.