With the lift of the export ban on last Friday, the US economy is seeing immediate results. Many energy companies have seen hits in their stock prices due to global concerns but many experts still hold that the long term goals outweigh the short term losses. An extensive study put together by the EIA shows that long term results will depend on price forecasting and resource assumptions.
Along with a multitude of other factors, lifting the oil export ban last Friday was the final ingredient in bad economic recipe. Stocks took massive hits with the Dow Jones Industrial Average dropping 2.1 percent and the S&P 500 falling 1.8 percent. Amidst worries of interest rates and expiring futures contracts, the elimination of the export ban put extra pressure on the overall US economy.
Even with the initial shock to the United States, the long term benefits still outweigh these speed bumps. Many of the drops were only indirectly related to the policy change and will be short lived. All around industry experts agree that lifting the ban will have far reaching positive benefits. Bloomberg View and The Economist both show the ban lift will lessen U.S. vulnerability to oil and gas industry fluctuations. The Wall Street Journal, Washington Post, and Houston Chronicle all agree that the action will lead to more stable prices and encouraged production.
Many studies have now been completed by EIA, IHS, and many others showing the exact economic implications of the ban lift. An extensive study by the EIA shows multiple production profiles differing in reaction to increased exports. While a few cases show little changes in production, many of the cases show 11.7 million barrel per day and 13.6 million barrel per day reaching into 2025. This increased production will lead to higher oil exports, increased GDP growth, and lower and more stable gasoline prices for the country.
Both the IHS and ICF have published pertinent statistics regarding industry and economic growth surrounding the policy change. The studies show direct growth of 1 million jobs, 1.2 million barrels added production per year, and $746 billion in additional investment until 2030. It also shows an average decrease of gasoline prices by 8 cents, resulting in a total saving of $265 billion for consumers based off purchasing trends and economic growth. There are many indirect results of the policy change including an additional 394,000 jobs per year abroad.
All studies agree that the added exports will put downward pressure on US gasoline prices. In addition to the industry benefits, the Government Accountability Office states that “removing export restrictions is expected to increase the size of the economy, with implications for investment, public revenue, and trade.” The congressional Budget Office also estimates GDP growth in the neighborhood of 0.5 to 1 percent by 2030.
Overall the US can expect the new policy change to have far reaching benefits in the industry. The policy will increase capital investments, increase oil production, and revenues for many US companies.