CRUDE OIL EXPORT 

RESTRICTIONS

Studies Suggest Allowing 

Exports Could Reduce 

Consumer Fuel Prices

Statement of Frank Rusco, Director, Natural 

Resources and Environment

Testimony 

Before the Committee on Agriculture, 

House of Representatives

For Release on Delivery 

Expected at 10 a.m. ET

July 8, 2015

GAO-15-745T

United States Government Accountability Office
United States Government Accountability Office

Highlights of GAO-15-745T, a testimony

before the Committee on Agriculture, House of 

Representatives

July 8, 2015

CRUDE OIL EXPORT RESTRICTIONS

Studies Suggest Allowing Exports Could Reduce 

Consumer Fuel Prices

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 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.

View GAO-15-745T. For more information, 

contact Frank Rusco at (202) 512-3841 or 

ruscof@gao.gov.
Letter

Page 1 GAO-15-745T 

Chairman Conaway, Ranking Member Peterson, and Members of the 

Committee:

Thank you for the opportunity to discuss our work on the implications of 

removing crude oil export restrictions. 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. Crude oil production increased by about 74 percent from 2008 

through 2014 to reach over 8 million barrels per day in 2014, and 

production increases in 2012, 2013, and 2014 were the largest annual 

increases since the beginning of U.S. commercial crude oil production in 

1859, according to the Energy Information Administration (EIA).1

My testimony discusses what is known about the pricing and other key 

implications of removing crude oil export restrictions. It is based on our 

September 2014 report that examined these and other issues,

More 

recently, however, crude oil prices have declined by 40 percent, from 

about $100 per barrel in the summer of 2014, to about $60 in May 2015. 

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 to be 

exported could affect crude oil prices, and the prices of consumer fuels 

refined from crude oil, such as gasoline and diesel.

2

 1

EIA is a statistical agency within the Department of Energy that collects, analyzes, and 

disseminates independent information on energy issues. 

and 

information on crude oil prices and production updated in June 2015. For 

the 2014 report, we 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 

2

GAO, Changing Crude Oil Markets: Allowing Exports Could Reduce Consumer Fuel 

Prices, and the Size of the Strategic Reserves Should Be Reexamined, GAO-14-807 

(Washington, D.C.: Sept. 30, 2014).

Letter
Page 2 GAO-15-745T 

consultants, and one conducted at a research organization.3 Market 

conditions have changed since these studies were conducted, 

underscoring some uncertainties surrounding estimates of potential 

implications of removing crude oil export restrictions. For our 2014 report, 

we 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. Although 

not generalizable to all potential stakeholders, these views provide 

illustrative examples. More details on our scope and methodology for that 

work can be found in the issued report. We conducted the work on which 

this statement is based in accordance with generally accepted 

government auditing standards. Those standards require that we plan 

and perform the audit to obtain sufficient, appropriate evidence to provide 

a reasonable basis for our findings and conclusions based on our audit 

objectives. We believe that the evidence obtained provides a reasonable 

basis for our findings and conclusions based on our audit objectives.

The export of domestically produced crude oil has generally been 

restricted since the 1970s. In particular, the Energy Policy and 

Conservation Act of 1975 (EPCA) led the Department of Commerce’s 

Bureau of Industry and Security (BIS) to promulgate regulations that 

require crude oil exporters to obtain a license.4

• exports from Alaska’s Cook Inlet,

These regulations provide 

that BIS will issue licenses for the following crude oil exports:

• exports to Canada for consumption or use therein,

• exports in connection with refining or exchange of SPR crude oil,

• exports of certain California crude oil up to twenty-five thousand

barrels per day,

 3

Resources for the Future, Crude Behavior: How Lifting the Export Ban Reduces Gasoline 

Prices in the United States (Washington, D.C.: Resources for the Future, February 2014, 

revised March 2014); ICF International and EnSys Energy (ICF International), The 

Impacts of U.S. Crude Oil Exports on Domestic Crude Production, GDP, Employment, 

Trade, and Consumer Costs (Washington, D.C.: ICF Resources, Mar. 31, 2014); IHS, 

U.S. Crude Oil Export Decision: Assessing the Impact of the Export Ban and Free Trade 

on the U.S. Economy (Englewood, CO: IHS, 2014); NERA Economic Consulting, 

Economic Benefits of Lifting the Crude Oil Export Ban (Washington, D.C.: NERA 

Economic Consulting, Sept. 9, 2014).

4

15 C.F.R. § 754.2(a).

Background
Page 3 GAO-15-745T 

• exports consistent with certain international energy supply 

agreements,

• exports consistent with findings made by the President under certain 

statutes, and

• exports of foreign origin crude oil that has not been commingled with 

crude oil of U.S. origin.

Other than for these exceptions, BIS considers export license applications 

for exchanges involving crude oil on a case-by-case basis, and BIS can 

approve them if it determines that the proposed export is consistent with 

the national interest and purposes of EPCA.5 In addition to BIS’s export 

controls, other statutes control the export of domestically produced crude 

oil, depending on where it was produced and how it is transported.6 In 

these cases, BIS can approve exports only if the President makes the 

necessary findings under applicable laws.7

As we previously found, recent increases in U.S. crude oil production 

have lowered the cost of some domestic crude oils.

Some of the authorized 

exceptions, outlined above, are the result of such presidential findings.

8 For example, prices 

for West Texas Intermediate (WTI) crude oil—a domestic crude oil used 

as a benchmark for pricing—were historically about the same price as 

Brent, an international benchmark crude oil from the North Sea between 

Great Britain and the European continent.9

 5

15 C.F.R. § 754.2(b)(2). 

However, from 2011 through 

2014, the price of WTI averaged $12 per barrel lower than Brent (see fig. 

6

For example, the Mineral Leasing Act of 1920 restricts exports of domestically produced 

crude oil transported by pipeline over certain rights-of-way (30 U.S.C. §185(u)); the Outer 

Continental Shelf Lands Act restricts exports of crude oil from the outer continental shelf 

(29 U.S.C. §1354); the Naval Petroleum Reserves Production Act restricts the export of 

crude oil produced from the Naval Petroleum Reserves (10 U.S.C. §7430) and Section 

201 of Pub. L. No. 104-58, “Exports of Alaskan North Slope Oil,” provides for exports of 

domestically produced crude oil transported by pipeline over rights-of-way granted 

pursuant to section 203 of the Trans-Alaska Pipeline Authorization Act (30 U.S.C. 

§185(s)). 

7

15 C.F.R. § 754.2(c).

8

GAO, Petroleum Refining: Industry’s Outlook Depends on Market Changes and Key 

Environmental Regulations, GAO-14-249 (Washington, D.C.: Mar. 14, 2014). 

9

Because of the large number of grades of crude oils, buyers and sellers use benchmark 

crude oils as a reference in pricing crude oil. A benchmark crude oil is typically an 

abundantly produced and frequently traded crude oil. For example, crude oils produced in 

North and South America are typically priced in reference to WTI. 
Page 4 GAO-15-745T 

1). 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.

Figure 1: Monthly West Texas Intermediate and Brent Crude Oil Prices, 2009-May 2015

Note: West Texas Intermediate is a domestic crude oil used as a benchmark for pricing, and Brent is 

an international benchmark from the North Sea between Great Britain and the European continent.

Much of the crude oil currently produced in the United States has 

characteristics that differ from historic domestic production. Crude oil is 

generally classified according to two parameters: density and sulfur 

content. Less dense crude oils are known as “light,” and denser crude oils 

are known as “heavy.” Crude oils with relatively low sulfur content are 

known as “sweet,” and crude oils with higher sulfur content are known as 

“sour.” As shown in figure 2, according to EIA, most domestic crude oil 

produced over the last 5 years has tended to be light oil. Specifically, 

according to EIA estimates, about all of the 1.8 million barrels per day 
Page 5 GAO-15-745T 

increase in production from 2011 to 2013 consisted of lighter sweet crude 

oils.10

Figure 2: U.S. Crude Oil Production and Energy Information Administration 

Forecast of Production by Crude Oil Type, 2011-2015

Note: The density, or gravity, of a crude oil is specified using the American Petroleum Institute (API) 

gravity standard, which measures the weight of crude oil in relation to water, which has an API gravity 

of 10 degrees. Heavy crude oils include those with an API gravity of less than 27; medium includes 

crude oil with an API from 27 to 35; and light includes crude oil with API gravities of 35 and above.

 10The density, or gravity of a crude oil is specified using the American Petroleum Institute 

(API) gravity standard, which measures the weight of crude oil in relation to water, which 

has an API gravity of 10 degrees. For the purposes of this estimate, we considered light 

oils as those with an API gravity of 35 degrees or above. See: Energy Information 

Administration, U.S. Crude Oil Production Forecast-Analysis of Crude Types (Washington, 

D.C.: May 29, 2014). 
Page 6 GAO-15-745T 

Light crude oil differs from the crude oil that many U.S. refineries are 

designed to process. Refineries are configured to produce transportation 

fuels and other products (e.g., gasoline, diesel, jet fuel, and kerosene) 

from specific types of crude oil. Refineries use a distillation process that 

separates crude oil into different fractions, or interim products, based on 

their boiling points, which can then be further processed into final 

products. Many refineries in the United States are configured to refine 

heavier crude oils and have therefore been able to take advantage of 

historically lower prices of heavier crude oils.11

According to EIA, additional production of light crude oil over the past 

several years has been absorbed into the market through several 

mechanisms, but the capacity of these mechanisms to absorb further 

increases in light crude oil production may be limited in the future for the 

following reasons:

For example, in 2013, the 

average density of crude oil used at domestic refineries was 30.8, while 

nearly all of the increase in production in recent years has been lighter 

crude oil with a density of 35 or above.

• Reduced imports of similar grade crude oils: According to EIA, 

additional production of light oil in the past several years has primarily 

been absorbed by reducing imports of similar grade crude oils. Light 

crude oil imports fell from 1.7 million barrels per day in 2011 to 1 

million barrels per day in 2013. As a result, there may be dwindling 

amounts of light crude oil imports that can be reduced in the future, 

according to EIA.

• Increased crude oil exports: Crude oil exports have increased 

recently, from less than thirty thousand barrels per day in 2008 to 396 

thousand barrels per day in June 2014. Continued increases in crude 

oil exports will depend, in part, on the extent of any relaxation of 

current export restrictions, according to EIA.

• Increased use of light crude oils at domestic refineries: Domestic 

refineries have increased the average gravity of crude oils that they 

refine. The average American Petroleum Institute (API) gravity of 

crude oil used in U.S. refineries increased from 30.2 degrees in 2008 

to 30.8 degrees in 2013, according to EIA. Continued shifts to use 

additional lighter crude oils at domestic refineries can be enabled by 

 11In general, heavier crude oils require more complex and expensive refineries to process 

the crude oil into usable products but have been less expensive to purchase than lighter 

crude oils. 
Page 7 GAO-15-745T 

investments to relieve constraints associated with refining lighter 

crude oils at refineries that were optimized to refine heavier crude oils, 

according to EIA.

• Increased use of domestic refineries: In recent years, domestic 

refineries have been run more intensively, allowing the use of more 

domestic crude oils. Utilization—a measure of how intensively 

refineries are used that is calculated by dividing total crude oil and 

other inputs used at refineries by the amount refineries can process 

under usual operating conditions—increased from 86 percent in 2011 

to 88 percent in 2013. There may be limits to further increases in 

utilization of refineries that are already running at high rates, 

according to EIA.

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. As 

discussed earlier, increasing domestic crude oil production has resulted in 

lower prices of some domestic crude oils compared with international 

benchmark crude oils. Three of the studies we reviewed also concluded 

that, absent changes in crude oil export restrictions, the expected growth 

in crude oil production may not be fully absorbed by domestic refineries or 

through exports (where allowed), contributing to even wider differences in 

prices between some domestic and international crude oils. 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.

While the studies we reviewed and most of the stakeholders we 

interviewed agreed that domestic crude oil prices would increase if crude 

oil export restrictions were removed, stakeholders highlighted several 

uncertainties that could affect the extent of price increases. The studies 

we reviewed made assumptions about these uncertainties, and actual 

price implications of removing crude oil export restrictions may differ from 

those estimated in these studies depending on how export restrictions 

and market conditions evolve. Specifically, stakeholders raised the 

following three key uncertainties:

• Extent of future increases in crude oil production. According to 

two stakeholders, in the absence of exports, higher production of 

domestic light sweet crude oil would tend to increase the mismatch 

Removing Crude Oil 

Export Restrictions Is 

Expected to Increase 

Domestic Crude Oil 

Prices and Could 

Decrease Consumer 

Fuel Prices
Page 8 GAO-15-745T 

between such crude oils and the refining industry. This was 

corroborated by two of the studies. As a result, one study indicated 

that a greater increase in production would increase the price effects 

of removing crude oil export restrictions. On the other hand, lower 

than anticipated production of such crude oil would lower potential 

price effects as the additional crude oil could more easily be absorbed 

domestically.

• Extent to which crude oil production increases can be absorbed. 

The domestic refining industry and exports to Canada have absorbed 

the increases in domestic crude oil production thus far, and one 

stakeholder told us the domestic refining industry could provide 

sufficient capacity to absorb additional future crude oil production. On 

the other hand, some stakeholders suggested that the U.S. refining 

industry will not be able to keep pace with increasing U.S. light crude 

oil production. For example, IHS stated that refinery investments to 

process additional light crude oil face significant risks in the form of 

potentially stranded investments if export restrictions were to change, 

and this could result in investments not being made as quickly as 

anticipated.12

• Extent to which export restrictions change. Aspects of the export 

restrictions could be further defined or interpreted in ways that could 

change the pricing dynamics of domestic crude oil markets. In 2014, 

for example, the Department of Commerce provided clarifications that 

condensate—a type of light crude oil13

 12IHS is a firm that provides comprehensive economic and financial information on 

countries, regions, and industries. 

—that has been processed 

through a distillation tower is not considered crude oil and so not 

13Specifically, the Department of Commerce’s definition of crude oil includes condensates, 

which are light liquid hydrocarbons recovered primarily from natural gas wells. 
Page 9 GAO-15-745T 

subject to export restrictions.14 One stakeholder stated that this may 

lead to more condensate exports than expected.15

Within the context of these uncertainties, estimates of potential price 

effects vary in the four studies we reviewed, as shown in table 1. 

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.16 For comparison, at the beginning of June 2014, WTI 

was $103 per barrel, and these estimates represented 2 to 8 percent of 

that price. 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 

rising to less than $75 by 2035.17 According to the NERA Economic 

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.

 14Specifically, companies often process condensate through stabilization units to reduce 

their volatility and prepare the condensate for transport to markets. Some stabilization 

units include distillation towers. In March and May 2014, the Department of Commerce 

issued commodity classifications to two companies that determined that condensates 

processed through a crude oil distillation tower, as described by the two companies 

requesting clarification, did not meet the definition of crude oil in BIS’s regulations and 

thus were not subject to the export prohibitions applicable to U.S. produced crude oil. The 

Department of Commerce clarified the factors it will consider in determining whether a 

product has been "processed through a crude oil distillation tower" in December, 2014.

15This clarification provided by the Department of Commerce occurred after the 

publication of the Resources for the Future, ICF International, and IHS studies and thus 

this was not taken into consideration in the studies. NERA Economic Consulting also did 

not consider the potential effect of the clarification in its study. 

16Unless otherwise noted, dollar estimates in the rest of this report have been converted 

to 2014 year dollars. These are average price effects over the study time frames, and 

some cases in some studies projected larger price effects in the near term that declined 

over time.

17NERA Economic Consulting is a global firm of experts dedicated to applying economic, 

finance, and quantitative principles to complex business and legal challenges. 
Page 10 GAO-15-745T 

Table 1: Crude Oil Price Implications of Removing Crude Oil Export Restrictions from Four Studies Issued in 2014

Resources for the Future ICF International IHS 

NERA Economic 

Consulting

U.S. crude oil price Midwest refiner acquisition 

costs increase $6.68 per 

barrel.

West Texas Intermediate 

crude oil prices increase 

$2.35 to $4.19 per barrel

on average from 2015-

2035.

a

Prices increase $7.89 

per barrel on average 

from 2016-2030.

Prices increase $1.74 per 

barrel in the reference case 

and $5.95 per barrel in the 

high case on average from 

2015-2035.

Sources: GAO analysis of Resources for the Future, ICF International, IHS, and NERA Economic Consulting studies. | GAO-15-745T

b

Note: Estimates are in 2014 year dollars.

a

Refiner acquisition costs are the costs of crude oil including transportation and other fees paid by the 

refiner. Such costs may be closely related to the prices of crude oil.

b

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. A decrease in consumer fuel prices 

could occur because such prices tend to follow international crude oil 

prices rather than domestic crude oil prices, according to the studies 

reviewed and most of the stakeholders interviewed. If domestic crude oil 

exports caused international crude oil prices to decrease, consumer fuel 

prices could decrease as well.

Implications refer to the difference between the reference case and its baseline with export 

restrictions in place, and also the difference between the high oil and gas recovery case and its 

corresponding baseline. NERA Economic Consulting also found that removing crude oil export 

restrictions would have no measurable effect in the low world oil price case.

18 Table 2 shows that the estimates of the 

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. 

These estimates represented 0.4 to 3.4 percent of the average U.S. retail 

gasoline price at the beginning of June 2014. 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.

 18Resources for the Future also estimates a decrease in consumer fuel prices but this 

decrease is as a result of increased refinery efficiency (even with an estimated slight 

increase in the international crude oil price).
Page 11 GAO-15-745T 

Table 2: Consumer Fuel Price Implications of Removing Crude Oil Export Restrictions from Four Studies Issued in 2014

Resources for the 

Future ICF International IHS NERA Economic Consulting

U.S. consumer 

fuel prices

a

Gasoline prices would 

decline by 1.8 to 4.6 

cents per gallon on 

average.

Petroleum product prices 

would decline by 1.5 to 2.4 

cents per gallon on average 

from 2015-2035.

Gasoline prices would 

decline by 9 to 13 

cents per gallon on 

average from 2016-

2030.

Petroleum product prices would 

decline by 3 cents per gallon on 

average from 2015-2035 in the 

reference case and 11 cents per 

gallon in the high case. Gasoline 

prices would decline by 3 cents 

per gallon in the reference case 

and 10 cents per gallon in the high 

case. Fuel prices would not be 

affected in a low world oil price 

case.

Sources: GAO analysis of Resources for the Future, ICF International, IHS, and NERA Economic Consulting studies. | GAO-15-745T

Note: Dollar estimates are in 2014 year dollars.

a

Implications refer to the difference between the reference case and its baseline with export 

restrictions in place, and the difference between the high oil and gas recovery case and its 

corresponding baseline.
Page 12 GAO-15-745T 

The effect of removing crude oil export restrictions on domestic consumer 

fuel prices depends on several uncertainties, as we discussed in our 

September 2014 report.19 First, it would depend on the extent to which 

domestic versus international crude oil prices determine the domestic 

price of consumer fuels. A 2014 research study examining the 

relationship between domestic crude oil and gasoline prices concluded 

that low domestic crude oil prices in the Midwest during 2011 did not 

result in lower gasoline prices in that region.20

Second, two of the stakeholders we interviewed suggested that there 

could be important regional differences in consumer fuel price 

implications and that prices could increase in some regions—particularly 

the Midwest and the Northeast—due to changing transportation costs and 

potential refinery closures. For example, these two stakeholders told us 

that because of requirements to use more expensive U.S.-built, -owned, 

and -operated ships to move crude oil between U.S. ports, allowing 

exports could enable some domestic crude oil producers to ship U.S. 

crude oil for less cost to refineries in foreign countries.

This research supports the 

assumption made in the four studies we reviewed that to some extent 

higher prices of some domestic crude oils as a result of removing crude 

oil export restrictions would not be passed on to consumer fuel prices. 

However, some stakeholders told us that this may not always be the case 

and that more recent or detailed data could show that lower prices for 

some domestic crude oils have influenced consumer fuel prices.

21

 19

Specifically, 

representatives of one refiner told us that, if export restrictions were 

removed, they could ship oil to their refineries in Europe at a lower cost 

than delivering the same oil to a refinery on the U.S. East Coast. 

According to another stakeholder, this could negatively affect the ability of 

some domestic refineries to compete with foreign refineries. Additionally, 

because refineries are currently benefiting from low domestic crude oil 

prices, some studies and stakeholders noted that refinery margins could 

be reduced if removing export restrictions increased domestic crude oil 

prices. As a result, some refineries could face an increased risk of 

GAO-14-807.

20See Severin Borenstein and Ryan Kellogg, “The Incidence of an Oil Glut: Who Benefits 

from Cheap Crude Oil in the Midwest?” The Energy Journal 35, no. 1 (2014). 

21The Merchant Marine Act of 1920, also known as the Jones Act, in general, requires that 

any vessel (including barges) operating between two U.S. ports be U.S.-built, -owned, and 

-operated. 

Price Effects of Allowing Alaskan North 

Slope Crude Oil Exports

In 1995, Congress removed the restrictions on 

the export of Alaskan North Slope crude oil. 

From the time the restrictions were removed 

until 2004, about 2.7 percent of Alaskan North 

Slope crude oil was exported; however, no 

Alaskan North Slope crude oil has been 

exported since 2004.The experience of 

allowing Alaskan North Slope crude oil 

exports may illustrate some of the potential 

effects of removing crude oil export 

restrictions nationally. In 1999, we reviewed 

the effects of allowing Alaskan North Slope 

crude oil exports and concluded that:

• lifting the export ban raised the relative 

prices of Alaskan North Slope and 

comparable California crude oils by 

between $0.98 and $1.30 per barrel;

a

• some refiners’ costs increased 

commensurate with the increase in crude 

oil prices; and

b

• consumer fuel prices for gasoline, diesel, 

and jet fuel did not increase.

The effect of removing the export restrictions 

for Alaskan North Slope oil is not completely 

understood due to data limitations and the 

difficulty of separating the effects of removing 

the export restrictions from other market 

changes that occurred at the same time.

Source: GAO. | GAO-15-745T

a

GAO, Alaskan North Slope Oil: Limited 

Effects of Lifting Export Ban on Oil and 

Shipping Industries and Consumers, 

GAO/RCED-99-191 (Washington, D.C., 

July 1, 1999).

b

These estimates have not been adjusted for 

inflation.
Page 13 GAO-15-745T 

closure, especially those located in the Northeast. However, according to 

one stakeholder, domestic refiners still have a significant cost advantage 

in the form of less expensive natural gas, which is an important energy 

source for many refineries. For this and other reasons, one stakeholder 

told us they did not anticipate refinery closures as a result of removing 

export restrictions.

The studies we reviewed for our September 2014 report,22

• Crude oil production. Removing crude oil export restrictions may 

increase domestic crude oil production. Even with current crude oil 

export restrictions, given various scenarios, EIA projected that 

domestic production will continue to increase through 2020.

generally 

suggested that removing crude oil export restrictions may increase 

domestic crude oil production and may affect the environment and the 

economy:

23 If export 

restrictions were removed, according to the four studies we reviewed, 

the increased prices of domestic crude oil are projected to lead to 

further increases in 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.24

• Environment. Two of the studies we reviewed stated that the 

increased crude oil production that could result from removing the 

restrictions on crude oil exports may affect the environment. Most 

stakeholders we interviewed echoed this statement. This is consistent 

This is equivalent to 1.5 percent to 

almost 40 percent of production in April 2014.

 22GAO-14-807.

23See EIA, Annual Energy Outlook 2015, DOE/EIA-0383(2015) (Washington, D.C.: April 

2015). 

24In addition, Resources for the Future estimated that oil production in Canada and in the 

Midwest United States would gradually increase if the restrictions were lifted by about 

84,000 barrels per day. Resources for the Future estimated production elsewhere in the 

United States and the rest of the world would increase by 54,000 barrels per day for a 

total increase in world production of 138,000 additional barrels per day. IHS projected an 

additional 1.2 to 2.3 million barrels per day of crude oil production from 2016 through 

2030. 

Removing Crude Oil 

Export Restrictions Is 

Expected to Increase 

Domestic Production 

and Have Other 

Implications
Page 14 GAO-15-745T 

with what we found in a September 2012 report.25

• The economy. The four studies we reviewed suggested that 

removing crude oil export restrictions would increase the size of 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.

In that 2012 report 

we found that crude oil development may pose certain inherent 

environmental and public health risks. However, the extent of the risk 

is unknown, in part, because the severity of adverse effects depends 

on various location- and process-specific factors, including the 

location of future shale oil and gas development and the rate at which 

it occurs. It also depends on geology, climate, business practices, and 

regulatory and enforcement activities. 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.

26 For 

example, NERA Economic Consulting’s study projected an average of 

230,000 to 380,000 workers would be removed from unemployment 

through 2020 if export restrictions were eliminated in 2015.27

 25GAO, Oil and Gas: Information on Shale Resources, Development, and Environmental 

and Public Health Risks, 

These 

employment benefits would largely disappear if export restrictions 

were not removed until 2020 because by then the economy would 

have returned to full employment. Two of the studies we reviewed 

suggested that removing export restrictions would increase 

government revenues, although the estimates of the increase vary. 

One study estimated that total government revenue would increase by 

a combined $1.4 trillion in additional revenue from 2016 through 2030, 

GAO-12-732 (Washington, D.C.: Sept. 5, 2012). 

26Growth in one sector of the economy can result in economy-wide growth through followon effects. For example, researchers at the Federal Reserve Bank of Dallas found that oil 

development in the Eagle Ford region of South Texas has had profound effects on jobs, 

income, and spending in the region with effects beyond those in the oil sector alone. See: 

Gilmer, Robert W., Raúl Hernandez, and Keith Phillips, “Oil Boom in Eagle Ford Shale 

Brings New Wealth to South Texas,” Southwest Economy (Federal Reserve Bank of 

Dallas: Second Quarter, 2012).

27According to the NERA study, because of the increase in economic growth triggered by 

investment in more production capacity and infrastructure, there will be a corresponding 

acceleration of the rate at which the economy moves toward full employment.
Page 15 GAO-15-745T 

and another study estimated that U.S. federal, state, and local tax 

receipts combined with royalties from drilling on federal lands could 

increase by an annual average of $3.9 to $5.7 billion from 2015 

through 2035.

Chairman Conaway, Ranking Member Peterson, and Members of the 

Committee, this completes my prepared statement. I would be pleased to 

answer any questions that you may have at this time.

If you or your staff members have any questions concerning this 

testimony, please contact me at (202) 512-3841 or ruscof@gao.gov. 

Contact points for our Offices of Congressional Relations and Public 

Affairs may be found on the last page of this statement. Other individuals 

who made key contributions include Christine Kehr (Assistant Director), 

Quindi Franco, Alison O’Neill, and Kiki Theodoropoulos.

GAO Contact and 

Staff 

Acknowledgments

(361658)
This is a work of the U.S. government and is not subject to copyright protection in the 

United States. The published product may be reproduced and distributed in its entirety 

without further permission from GAO. However, because this work may contain 

copyrighted images or other material, permission from the copyright holder may be 

necessary if you wish to reproduce this material separately.
The Government Accountability Office, the audit, evaluation, and 

investigative arm of Congress, exists to support Congress in meeting its 

constitutional responsibilities and to help improve the performance and 

accountability of the federal government for the American people. GAO 

examines the use of public funds; evaluates federal programs and 

policies; and provides analyses, recommendations, and other assistance 

to help Congress make informed oversight, policy, and funding decisions. 

GAO’s commitment to good government is reflected in its core values of 

accountability, integrity, and reliability.

The fastest and easiest way to obtain copies of GAO documents at no 

cost is through GAO’s website (http://www.gao.gov). Each weekday 

afternoon, GAO posts on its website newly released reports, testimony, 

and correspondence. To have GAO e-mail you a list of newly posted 

products, go to http://www.gao.gov and select “E-mail Updates.”

The price of each GAO publication reflects GAO’s actual cost of 

production and distribution and depends on the number of pages in the 

publication and whether the publication is printed in color or black and 

white. Pricing and ordering information is posted on GAO’s website, 

http://www.gao.gov/ordering.htm. 

Place orders by calling (202) 512-6000, toll free (866) 801-7077, or 

TDD (202) 512-2537.

Orders may be paid for using American Express, Discover Card, 

MasterCard, Visa, check, or money order. Call for additional information.

Connect with GAO on Facebook, Flickr, Twitter, and YouTube.

Subscribe to our RSS Feeds or E-mail Updates. Listen to our Podcasts.

Visit GAO on the web at www.gao.gov.

Contact:

Website: http://www.gao.gov/fraudnet/fraudnet.htm

E-mail: fraudnet@gao.gov

Automated answering system: (800) 424-5454 or (202) 512-7470

Katherine Siggerud, Managing Director, siggerudk@gao.gov, (202) 512-

4400, U.S. Government Accountability Office, 441 G Street NW, Room 

7125, Washington, DC 20548

Chuck Young, Managing Director, youngc1@gao.gov, (202) 512-4800

U.S. Government Accountability Office, 441 G Street NW, Room 7149 

Washington, DC 20548

GAO’s Mission

Obtaining Copies of 

GAO Reports and 

Testimony

Order by Phone

Connect with GAO

To Report Fraud, 

Waste, and Abuse in 

Federal Programs

Congressional 

Relations

Public Affairs

Please Print on Recycled Paper.