As we previously found, recent increases in U.S. crude oil production  have lowered the cost of some domestic crude oils. In 2014, prices for these benchmark crude oils narrowed as global oil  prices declined, and WTI averaged $52 from January through May 2015,  while Brent averaged $57. The development of U.S. crude oil production  has created some challenges for crude oil transportation infrastructure  because some production has been in areas with limited linkages to  refining centers. According to EIA, these infrastructure constraints have  contributed to discounted prices for some domestic crude oils. Light crude oil differs from the crude oil that many U.S. refineries are  designed to process. Removing Crude Oil Export Restrictions Is Expected to Increase Domestic Crude Oil Prices and Could Decrease Consumer Fuel Prices

In our September 2014 report, we reported that according to the studies  we reviewed and the stakeholders we interviewed, removing crude oil  export restrictions would likely increase some domestic crude oil prices,  but could decrease consumer fuel prices, although the extent of  consumer fuel price changes are uncertain and may vary by region. According to  these studies, by removing the export restrictions, these domestic crude  oils could be sold at prices closer to international prices, reducing the  price differential and aligning the price of domestic crude oil with  international benchmarks. Specifically, estimates in these studies of the increase in domestic crude  oil prices due to removing crude oil export restrictions ranged from about  $2 to $8 per barrel. In addition, NERA Economic Consulting found that removing  export restrictions would have no measurable effect in a case that  assumes a low future international oil price of $70 per barrel in 2015   According to the NERA Economic  rising to less than $75 by 2035.Consulting study, current production costs are close to these values, so  that removing export restrictions would provide little incentive to produce  more light crude oil. Regarding consumer fuel prices, such as gasoline, diesel, and jet fuel, the  studies we reviewed and most of the stakeholders we interviewed  suggested that consumer fuel prices could decrease as a result of  removing crude oil export restrictions. If domestic crude oil  exports caused international crude oil prices to decrease, consumer fuel   Table 2 shows that the estimates of the  prices could decrease as well. price effects on consumer fuels varied in the four studies we reviewed. Price estimates ranged from a decrease of 1.5 to 13 cents per gallon. In addition, NERA  Economic Consulting found that removing export restrictions would have  no measurable effect on consumer fuel prices when assuming a low  future world crude oil price. Removing Crude Oil Export Restrictions Is Expected to Increase Domestic Production and Have Other Implications

The studies we reviewed for our September 2014 report, generally  suggested that removing crude oil export restrictions may increase  domestic crude oil production and may affect the environment and the  economy:
Crude oil production. Removing crude oil export restrictions may  increase domestic crude oil production. Projections of this increase  varied in the studies we reviewed—from a low of an additional  130,000 barrels per day on average from 2015 through 2035,  according to the ICF International study, to a high of an additional 3.3  million barrels per day on average from 2015 through 2035 in NERA  Economic Consulting’s study.almost 40 percent of production in April 2014. The stakeholders who raised  concerns about the effect of removing the restrictions on crude oil  exports on the environment identified risks including those related to  the quality and quantity of surface and groundwater sources;  increases in greenhouse gas and other air emissions, and increases  in the risk of spills from crude oil transportation. Three of the studies projected that removing export  restrictions would lead to additional investment in crude oil production  and increases in employment. This growth in the oil sector would—in  turn—have additional positive effects in the rest of the economy.
Why GAO Did This Study

After decades of generally falling U.S. crude oil production, technological advances in the extraction of crude oil from shale formations have contributed to increases in U.S. production. In response to these and other market developments, some have proposed removing the 4 decade old restrictions on crude oil exports, underscoring the need to understand how allowing crude oil exports could affect crude oil prices, and the prices of consumer fuels refined from crude oil, such as gasoline and diesel.
This testimony discusses what is known about the pricing and other key potential implications of removing crude oil export restrictions. It is based on GAO's September 2014 report ( GAO-14-807 ), and information on crude oil production and prices updated in June 2015. For that report, GAO reviewed four studies issued in 2014 on crude oil exports; including two sponsored by industry and conducted by consultants, one sponsored by a research organization and conducted by consultants, and one conducted at a research organization. Market conditions have changed since these studies were conducted, underscoring some uncertainties surrounding estimates of potential implications of removing crude oil export restrictions. For its 2014 report, GAO also summarized the views of a nongeneralizable sample of 17 stakeholders including representatives of companies and interest groups with a stake in the outcome of decisions regarding crude oil export restrictions, as well as academic, industry, and other experts.

What GAO Found

In September 2014, GAO reported that according to studies it reviewed and stakeholders it interviewed, removing crude oil export restrictions would likely increase domestic crude oil prices, but could decrease consumer fuel prices, although the extent of price changes are uncertain and may vary by region. The studies identified the following implications for U.S. crude oil and consumer fuel prices:
Crude oil prices . The four studies GAO reviewed estimated that if crude oil export restrictions were removed, U.S. crude oil prices would increase by about $2 to $8 per barrel—bringing them closer to international prices. Prices for some U.S. crude oils have been lower than international prices—for example, one benchmark U.S. crude oil averaged $52 per barrel from January through May 2015, while a comparable international crude oil averaged $57. In addition, one study found that, when assuming low future crude oil prices overall, removing export restrictions would have no measurable effect on U.S. crude oil prices.
Consumer fuel prices. The four studies suggested that U.S. prices for gasoline, diesel, and other consumer fuels follow international prices. If domestic crude oil exports caused international crude oil prices to decrease, consumer fuel prices could decrease as well. Estimates of the consumer fuel price implications in the four studies GAO reviewed ranged from a decrease of 1.5 to 13 cents per gallon. In addition, one study found that, when assuming low future crude oil prices, removing export restrictions would have no measurable effect on consumer fuel prices.
Some stakeholders cautioned that estimates of the price implications of removing export restrictions are subject to several uncertainties, such as the extent of U.S. crude oil production increases, and how readily U.S. refiners are able to absorb such increases. Some stakeholders further told GAO that there could be important regional differences in the price implications of removing export restrictions.
The studies GAO reviewed and the stakeholders it interviewed generally suggested that removing crude oil export restrictions may also have the following implications:
Crude oil production . Removing export restrictions may increase domestic production—over 8 million barrels per day in April 2014—because of increasing domestic crude oil prices. Estimates ranged from an additional 130,000 to 3.3 million barrels per day on average from 2015 through 2035.
Environment . Additional crude oil production may pose risks to the quality and quantity of surface groundwater sources; increase greenhouse gas and other emissions; and increase the risk of spills from crude oil transportation.
The economy . Three of the studies projected that removing export restrictions would lead to additional investment in crude oil production and increases in employment. This growth in the oil sector would—in turn—have additional positive effects in the rest of the economy, including for employment and government revenues.