American Oil and Gas Reporter - April 2015 - 60

IHS Reaffirms Benefit Of Crude Exports
WASHINGTON-The ban on U.S.
crude oil exports exacerbates the challenges
of lower oil prices for U.S. tight oil production, and creates a "doubly chilling
effect" on additional investment, jobs and
oil production that actually would lower
gasoline prices if the ban was lifted, concludes IHS Inc. in a new study.
IHS says Unleashing the Supply Chain:
Assessing the Economic Impact of a U.S.
Crude Oil Free Trade Policy, builds on its
previous research on economic impacts
related to the 1970s-era oil export ban.
According to the report, IHS says, substantial
economic benefits of developing the nation's
oil and gas resources extend beyond oil
producing regions throughout an extensive
supply chain that includes every state.
Each new oil production job creates
three jobs in the supply chain and another
six in the broader economy, IHS maintains,
saying the export ban deters additional
production, which reverberates in job
losses throughout the supply chain and
broader economy.
IHS points out that its previous research
found that removing export restrictions
would result in significant gains in jobs,
U.S. gross domestic product, household
disposable income, and government revenues. It says its latest research also determines that lifting the ban would lower
gasoline prices, since U.S. gasoline is
part of a global market and the crude
export ban prevents additional supplies
from being produced.
The study finds that the negative effects
of the ban, which IHS concludes force
U.S. light crude to be sold at a sharp discount, are amplified in today's low-price
environment. During periods of lower
oil prices, IHS explains, crude oil production drops ever more sharply with
each incremental price cut, such as those
that result from the crude export ban.
The study finds a $3-a-barrel change in a
$50-a-barrel price environment can have
the same effect as a $10 change in a
$100-a-barrel environment.
The study notes that the price differential between international (Brent) and
domestic (West Texas Intermediate) crude
has widened, ranging from $7 to $12
during February and early March.
"The decline in global oil prices provides further need to remove the market
distortions created by the U.S. crude oil
export ban, and to avoid the additional
disruption to investment in oil and gas
production and its associated economic
benefits and jobs growth," says Kurt Barrow, IHS vice president, downstream en-

60 THE AMERICAN OIL & GAS REPORTER

ergy. "U.S. crude production faces the
doubly punitive impact of low global oil
prices and additional price discounts compared with international crudes.
"At current prices, the spread between
Brent and WTI pricing (may) be the difference between the viability and nonviability of a great deal of new investment,"
he adds.

Supply Chain Benefits
IHS says Unleashing the Supply Chain
focuses on the impact of upstream expenditures from lifting the crude oil export
ban on the diverse set of industry sectors
that support oil and gas producers-from
steel and nonferrous metals to engines,
pumping equipment, construction, professional services, and railroads.
It says this new study affirms previous
IHS research that ending the crude oil
export ban would benefit the entire economy, generating another 394,000 jobs annually, $238 in annual household disposable
income, and $86 billion more a year in
gross domestic product, on average, from
2016 to 2030. The increased economic activity would add $1.3 trillion to cumulative
government revenues during that period.
Additionally, IHS says, the increased
supply of oil on the global market would
lower U.S. gasoline prices by an average
of 8 cents a gallon.
Unleashing the Supply Chain finds
that more than a third of the total economic
benefits of lifting the export ban would
accrue to supply chain industries. According to IHS:
* The crude oil supply chain would
add $26 billion to GDP each year from
2016 to 2030.
* Total employment in the supply
chain would average 124,000 new jobs a
year from 2016 to 2030, contributing to
the 394,000 jobs annually that would be
created economywide over that period.
* Labor income would rise by more
than $21 billion a year, (which translates
to an additional $158 per household).
* Cumulative government revenues
from corporate and personal taxes attributed to supply chain industries would increase by $429 billion.

Impacts By State
Unleashing the Supply Chain also
maps the potential supply chain economic
benefits of a crude oil free trade policy
for each state. Among those findings,
IHS says in states where the crude oil industry predominates, such as Texas, core
supplier industries such as construction

and well services are poised to reap the
largest economic benefits in terms of
jobs and value added, followed by professional services.
In states with essentially no crude oil
production, such as Florida and New York,
key supplier industries that incur the largest
benefit include industrial equipment and
machinery, professional services, financial
services, and information technology.
IHS says the supply chain can account
for half of the value added from lifting
the export ban in states with diverse and
mature sets of supplier industries. Washington state's supply chain industries, for
example, which are led by information
technology and manufacturing, would contribute 47 percent of the state's total GDP
benefit from higher crude oil exports over
2016-30. Illinois, which IHS notes is an
oil-producing state with diverse supplier
industries, would derive 58 percent of its
total GDP impacts from its supply chain.
California and Texas, which IHS points
out are large oil producers that also have
substantial manufacturing activity and
diverse supply chain sectors, are expected
to yield the largest benefits from lifting
the export ban. Together, they account
for about 25 percent of the total U.S.
supply chain jobs and labor income gains
to be had from repealing the ban, and 20
percent of the value-added contributions,
IHS predicts.
But non-oil-producing states such as
Massachusetts and Maryland also would
see strong growth in supply chain-associated government revenues, IHS continues. Those two states rank among the
top, according to the report, in terms of
the GDP and labor income impacts on
their supply chain industries, suggesting
strong ties between their supply chain
activity and their government revenue
from associated taxes, IHS reasons.
Unleashing the Supply Chain: Assessing the Economic Impact of a US Crude
Oil Free Trade Policy may be downloaded
at www.ihs.com/crudeoilsupplychain. Ì

Coming In May

May's Industry Success Strategies
special reports examines the diverse
mix of business, operating and financial tactics that independents ranging
in size from small upstream MLPs,
to mid-sized LLCs and large C corporations are implementing to capitalize on current business conditions
and position themselves for the inevitable market rebound.



American Oil and Gas Reporter - April 2015

Table of Contents for the Digital Edition of American Oil and Gas Reporter - April 2015

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