CHANGING CRUDE 

OIL MARKETS

Allowing Exports 

Could Reduce 

Consumer Fuel 

Prices, and the Size 

of the Strategic 

Reserves Should Be 

Reexamined

Report to the Ranking Member,

Committee on Energy and Natural 

Resources, U.S. Senate

September 2014

GAO-14-807

United States Government Accountability Office
United States Government Accountability Office

Highlights of GAO-14-807, a report to the 

Ranking Member, Committee on Energy and 

Natural Resources, U. S. Senate

September 2014

CHANGING CRUDE OIL MARKETS

Allowing Exports Could Reduce Consumer 

Fuel Prices, and the Size of the Strategic Reserves Should Be Reexamined

Why GAO Did This Study

Almost 4 decades ago, in response to 

the Arab oil embargo and recession it 

triggered, Congress passed legislation 

restricting crude oil exports and 

establishing the SPR to release oil to 

the market during supply disruptions 

and protect the U.S. economy from 

damage. After decades of generally 

falling U.S. crude oil production, 

technological advances have 

contributed to increasing U.S. 

production. Meanwhile, net crude oil 

imports—imports minus exports—have 

declined from a peak of about 60 

percent of consumption in 2005 to 30

percent in the first 5 months of 2014.

According to Energy Information 

Administration forecasts, net imports 

are expected to remain well below 

2005 levels into the future. 

GAO was asked to provide information 

on the implications of removing crude 

oil export restrictions. This report 

examines what is known about (1)

price implications of removing crude oil 

export restrictions; (2) other key 

potential implications; and (3) 

implications of recent changes in 

market conditions on the SPR. GAO 

reviewed four studies on crude oil 

exports, including two sponsored by 

industry, and summarized the literature 

and views of a nonprobability sample

of stakeholders including academic, 

industry, and other experts. 

What GAO Recommends

In view of changing market conditions

and in tandem with activities to assess 

other aspects of the SPR, GAO 

recommends that the Secretary of 

Energy reexamine the size of the SPR. 

In commenting on a draft of this report, 

DOE concurred with GAO’s

recommendation.

What GAO Found

The studies GAO reviewed and stakeholders interviewed suggest that removing 

crude oil export restrictions is likely to increase domestic crude oil prices but 

decrease consumer fuel prices. Prices for some U.S. crude oils are lower than 

international prices—for example, one benchmark U.S. crude oil averaged $101

per barrel in 2014, while a comparable international crude oil averaged $109. 

Studies estimate that U.S. crude oil prices would increase by about $2 to $8 per 

barrel—bringing them closer to international prices. At the same time, studies 

and some stakeholders suggest that U.S. prices for gasoline, diesel, and other 

consumer fuels follow international prices, so allowing crude oil exports would 

increase world supplies of crude oil, which is expected to reduce international 

prices and, subsequently, lower consumer fuel prices. Some stakeholders told 

GAO that there could be important regional differences in the price implications 

of removing crude oil export restrictions. Some stakeholders cautioned that 

estimates of the implications of removing export restrictions are uncertain due to

several factors such as the extent of U.S. crude oil production increases, how 

readily U.S. refiners are able to absorb such increases, and how the global crude 

oil market responds to increasing U.S. production.

The studies GAO reviewed and stakeholders interviewed generally suggest that 

removing crude oil export restrictions may also have the following implications:

• Crude oil production. Removing export restrictions would increase 

domestic production—8 million barrels per day in April 2014—because of 

increasing domestic crude oil prices. Estimates range 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. Removing export restrictions is expected to increase the size 

of the economy, with implications for employment, investment, public 

revenue, and trade. For example, removing restrictions is expected to 

contribute to further declines in net crude oil imports, reducing the U.S. trade 

deficit.

Changing market conditions have implications for the size, location, and 

composition of Department of Energy's (DOE) Strategic Petroleum Reserve 

(SPR). In particular, increased domestic crude oil production and falling net 

imports may affect the ideal size of the SPR. Removing export restrictions is

expected to contribute to additional decreases in net imports in the future. As a 

member of the International Energy Agency, the United States is required to 

maintain public and private reserves of at least 90 days of net imports but, as of 

May 2014, the SPR held reserves of 106 days—worth about $73 billion—and

private industry held reserves of 141 days. DOE has taken some steps to assess 

the implications of changing market conditions on the location and composition of 

the SPR but has not recently reexamined its size. GAO has found that agencies 

should reexamine their programs if conditions change. Without such a 

reexamination, DOE cannot be assured that the SPR is sized appropriately and 

risks holding excess crude oil that could be sold to fund other national priorities.

View GAO-14-807. For more information, 

contact Frank Rusco at (202) 512-3841 or 

ruscof@gao.gov.
Page i GAO-14-807 Crude Oil

Letter 1

Background 3

Removing Crude Oil Export Restrictions Is Expected to Increase 

Domestic Crude Oil Prices and Could Decrease Consumer Fuel 

Prices 11

Removing Crude Oil Export Restrictions Is Expected to Increase 

Domestic Production and Have Other Effects 19

Changing Market Conditions Raise Questions about the Size, 

Location, and Composition of the SPR 25

Conclusions 35

Recommendation for Executive Action 35

Agency Comments and Our Evaluation 35

Appendix I Additional Information on Four Studies of the Implications of Removing 

Crude Oil Export Restrictions 37

Appendix II List of Stakeholders Interviewed 41

Appendix III Comments from the Department of Energy 42

Appendix IV GAO Contact and Staff Acknowledgments 44

Related GAO Products 45

Tables

Table 1: Crude Oil Price Implications of Removing Crude Oil 

Export Restrictions from Four Studies 15

Table 2: Consumer Fuel Price Implications of Removing Crude Oil 

Export Restrictions from Four Studies 16

Table 3: Description of Approach and Key Assumptions in Four 

Studies on the Implications of Removing Crude Oil Export 

Restrictions 38

Contents
Page ii GAO-14-807 Crude Oil

Table 4: Summary of Price Implications of Removing Crude Oil 

Export Restrictions in Four Studies 39

Table 5: Summary of Other Implications of Removing Crude Oil 

Export Restrictions in Four Studies 40

Figures

Figure 1: Weekly West Texas Intermediate and Brent Crude Oil 

Prices, 2009-June 2014 7

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

Administration Forecast of Production by Crude Oil Type, 

2011-2015 9

Figure 3: U.S. Net Petroleum Imports, Historical (1970-2013) and 

Energy Information Administration Forecasts 28

Figure 4: Heavier Crude Oil as a Percentage of Total U.S. Crude 

Oil Imports, 2008-2013 30

Figure 5: United States’ Historic and Estimated Compliance with 

International Energy Agency Obligation to Hold Reserves 34
Page iii GAO-14-807 Crude Oil

Abbreviations

API American Petroleum Institute

BIS Bureau of Industry and Security

DOE Department of Energy

EIA Energy Information Administration

EPCA Energy Policy and Conservation Act of 1975

IEA International Energy Agency

OPEC Organization of the Petroleum Exporting Countries

RFF Resources for the Future

SPR Strategic Petroleum Reserve

WTI West Texas Intermediate

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.
Page 1 GAO-14-807 Crude Oil

441 G St. N.W.

Washington, DC 20548

September 30, 2014

The Honorable Lisa Murkowski

Ranking Member

Committee on Energy and Natural Resources

United States Senate

Dear Senator Murkowski:

Almost 4 decades ago, Congress passed legislation restricting U.S. crude 

oil exports and establishing the Strategic Petroleum Reserve (SPR) in 

response to the Arab oil embargo and economic recession it triggered. In 

recent years, however, crude oil market conditions have changed, 

reversing decades-long trends in declining domestic crude oil production 

and increasing crude oil imports. Monthly crude oil production has 

increased by almost 68 percent from 2008 through April 2014, and 

increases in production in 2012 and 2013 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 With 

growing production, net crude oil imports—imports minus exports—have 

declined from a peak of about 60 percent of consumption in 2005 to about 

30 percent in the first 5 months of 2014. In response, some members of 

Congress proposed legislation to remove crude oil export restrictions, 

while others argued that restrictions should remain in place and not be 

modified.2 Recent congressional hearings stressed the need to 

understand how changing crude oil export restrictions could affect crude 

oil prices and the prices of consumer fuels refined from crude oil, such as 

gasoline and diesel.

At the same time, crude oil market changes may have implications for the 

SPR, the largest government-held emergency stockpile of crude oil in the 

world. The SPR holds 691 million barrels of crude oil in underground salt 

caverns along the Gulf Coast in Louisiana and Texas. In the event of a 

 1

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

disseminates independent information on energy issues. 

2

Proposed legislation includes H. R. 4349, the Crude Oil Export Act, which was referred to 

the House Foreign Affairs Committee, Subcommittee on Terrorism, Nonproliferation, and 

Trade on June 10, 2014.
Page 2 GAO-14-807 Crude Oil

crude oil supply disruption, the SPR relies on the existing commercial 

distribution and refining system to transport and process crude oil into 

usable products for sale to the public. Increasing crude oil production, 

shrinking crude oil imports, changing crude oil and fuel distribution 

patterns, and an evolving U.S. refining industry could have important 

implications for the SPR.

You asked us to provide information on the implications of removing 

crude oil export restrictions. This report examines what is known about: 

(1) the potential effect of removing crude oil export restrictions on prices 

of crude oil and consumer fuels; (2) other potential implications of 

removing crude oil export restrictions; and (3) implications for the SPR, if 

any, from recent changes in crude oil market conditions.

To conduct this work, we reviewed information, including studies by 

federal agencies, consultants, and academics, and summarized the 

results of interviews from a nonprobability sample of 17 stakeholders. We 

identified relevant information by conducting a literature search and 

obtaining suggestions from stakeholders we interviewed.3 We identified 

and summarized the results of four recent studies that estimate the 

potential implications of removing crude oil export restrictions. Two of 

these studies were sponsored by industry and conducted by consultants, 

another was sponsored by a research organization and conducted by 

consultants, and the fourth was conducted at a research organization.4 To 

assess the reasonableness of these studies, we conducted a high-level 

review of the assumptions and methods used, interviewed the studies’ 

authors, and obtained views of other stakeholders. We determined that 

these studies were reasonable for describing what is known about the 

range of potential implications but identified several limitations, which we 

discuss later in this report. We did not identify any other publicly available 

 3

Specifically, we searched sources including Proquest, PolicyFile, and Web of Science in 

April 2014.

4

The four studies are: Resources for the Future (RFF), 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, 

March 31, 2014); IHS, US Crude Oil Export Decision: Assessing the impact of the export 

ban and free trade on the US economy (Englewood, CO: IHS, 2014); and NERA 

Economic Consulting (NERA), Economic Benefits of Lifting the Crude Oil Export Ban 

(Washington, D.C.: NERA Economic Consulting, September 9, 2014).
Page 3 GAO-14-807 Crude Oil

primary studies of the implications of removing crude oil export 

restrictions. Stakeholders included 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. 

We selected stakeholders based on our literature review and 

recommendations from agency officials and others. We asked the same 

questions during each interview but also discussed individual 

stakeholders’ perspectives, as appropriate. We summarized their views, 

noting areas of consensus and disagreement. We may not have identified 

all stakeholders with a view on this topic, but we sought to balance the 

group with the range of perspectives. The views of stakeholders we 

selected are not generalizable to all potential stakeholders, but they 

provide illustrative examples of the range of views. To assess the 

implications of recent trends on the SPR, we interviewed Department of 

Energy (DOE) officials and reviewed agency and other documents. Data 

in this report are primarily from EIA, the International Energy Agency 

(IEA), and Bloomberg.5 To assess the reliability of these data, we 

reviewed relevant documentation, interviewed EIA and Bloomberg 

officials, and compared the data with similar data published in other 

sources. We determined these data to be sufficiently reliable for the 

purposes of this report. Appendix I provides additional information on the 

four studies we reviewed, and appendix II lists the stakeholders we 

interviewed.

We conducted this performance audit from April 2014 to September 2014 

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.

This section describes crude oil export restrictions, the SPR, and recent 

trends in U.S. crude oil production and the petroleum refining industry.

 5

Bloomberg is a provider of business and financial news, data, and analytics.

Background
Page 4 GAO-14-807 Crude Oil

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 which 

require crude oil exporters to obtain a license.6 These regulations provide 

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

• exports from Alaska’s Cook Inlet,

• 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 25,000 barrels per day,

• 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.7 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.8 In 

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

necessary findings under applicable laws.9 Some of the authorized 

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

 6

15 C.F.R. §754.2(a).

7

15 C.F.R. §754.2(b)(2). 

8

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)).

9

15 C.F.R. §754.2(c).

Crude Oil Export 

Restrictions
Page 5 GAO-14-807 Crude Oil

According to NERA, no other major oil producing country currently 

restricts crude oil exports.10

BIS approved about 30 to 40 licenses to export domestic crude oil per 

year from fiscal years 2008 through 2010. The number of BIS approved 

licenses increased to 103 in fiscal year 2013. Meanwhile, crude oil 

exports increased from less than 30 thousand barrels per day in 2008 to 

396 thousand barrels per day in June 2014—the highest level of exports 

since 1957. Nearly all domestic crude oil exports have gone to Canada.

To help protect the U.S. economy from damage caused by crude oil 

supply disruptions, Congress authorized the SPR in 1975. The SPR is 

owned by the federal government and operated by DOE. The SPR is 

authorized to hold up to 1 billion barrels of crude oil and has the capacity 

to store 727 million barrels of crude oil in salt caverns located at sites in 

Texas and Louisiana. According to DOE, the SPR held crude oil valuded 

at almost $73 billion dollars as of May, 2014. From fiscal year 2000 

through 2013, the federal government spent about $0.5 billion to 

purchase crude oil, and spent $2.5 billion for operations and maintenance 

of the reserve. 

The United States is a member of the IEA and has agreed, along with 28 

other member nations, to maintain reserves of crude oil or petroleum 

products equaling 90 days of net imports and to release these reserves 

and reduce demand during oil supply disruptions.11 The 90-day reserve 

requirement can be made up of government reserves, such as the SPR, 

and inventory reserves held by private industry.12

Under conditions prescribed by the Energy Policy and Conservation Act, 

as amended, the President and the Secretary of Energy have discretion 

to authorize the release of crude oil from the SPR to minimize significant 

 10NERA, Economic Benefits of Lifting the Crude Oil Export Ban, p.20.

11The 29 member countries of the IEA are Australia, Austria, Belgium, Canada, Czech 

Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Ireland, Italy, 

Japan, Republic of Korea, Luxembourg, the Netherlands, New Zealand, Norway, Poland, 

Portugal, Slovak Republic, Spain, Sweden, Switzerland, Turkey, the United Kingdom, and 

the United States. 

12Under the agreement, capacity to switch to nonpetroleum-based fuels and standby 

crude oil production capacity can also be used to meet the reserve requirement. 

The SPR
Page 6 GAO-14-807 Crude Oil

supply disruptions.13 In the event of a crude oil supply disruption, the SPR 

can supply the market by selling stored crude oil or trading crude oil in 

exchange for an equal quantity of crude oil plus an additional amount as a 

premium to be returned to the SPR in the future. When crude oil is 

released from the SPR, it flows through commercial pipelines or on 

waterborne vessels to refineries, where it is converted into gasoline and 

other petroleum products, and then transported to distribution centers for 

sale to the public.

Reversing a decades-long decline, U.S. crude oil production has 

increased in recent years. According to EIA data, U.S. production of 

crude oil reached its highest level in 1970 and generally declined through 

2008, reaching a level of almost one-half of its peak. During this time, the 

United States increasingly relied on imported crude oil to meet growing 

domestic energy needs. However, recent improvements in technologies 

have allowed producers to extract crude oil from shale formations that 

were previously considered to be inaccessible because traditional 

techniques did not yield sufficient amounts for economically viable 

production. In particular, the application of horizontal drilling techniques 

and hydraulic fracturing—a process that injects a combination of water, 

sand, and chemical additives under high pressure to create and maintain 

fractures in underground rock formations that allow crude oil and natural 

gas to flow—have increased U.S. crude oil and natural gas production.14

Monthly domestic crude oil production has increased from an average of 

about 5 million barrels per day in 2008 to about 8.4 million barrels per day 

in April 2014, an increase of almost 68 percent.

As we previously found, the growth in U.S. crude oil production has 

lowered the cost of some domestic crude oils.15 For example, prices for 

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

 13Pub. L. No. 94-163, §161, 89 Stat. 888-889 (1975), codified as amended at 42 U.S.C. 

§6241. The statute provides for a drawdown of the reserve upon a finding by the President 

that there is a “severe energy supply interruption” as well as an event that is, or is likely to 

become, an energy supply shortage “of significant scope or duration” (42 U.S.C. §6241(d), 

(h)).

14For more information on these technologies, see: GAO, Oil and Gas: Information on 

Shale Resources, Development, and Environmental and Public Health Risks, 

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

15GAO, Petroleum Refining: Industry’s Outlook Depends on Market Changes and Key 

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

Trends in U.S. Crude Oil 

Production and the 

Petroleum Refining 

Industry
Page 7 GAO-14-807 Crude Oil

benchmark for pricing—was historically about the same price as Brent, an 

international benchmark crude oil from the North Sea between Great

Britain and the European continent.

16 However, from 2011 through June 

13, 2014, the price of WTI averaged $14 per barrel lower than Brent (see 

fig. 1). In 2014, prices for these benchmark crude oils narrowed 

somewhat, and WTI averaged $101 through June 13, 2014, while Brent 

averaged $109. 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: Weekly West Texas Intermediate and Brent Crude Oil Prices, 2009-June 2014

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.

 16Because 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 8 GAO-14-807 Crude Oil

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,” while denser crude 

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

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

as “sour.” As shown in figure 1, according to EIA, production of new 

domestic crude oil has tended to be light oils. Specifically, according to 

EIA estimates about all of the 1.8 million barrels per day growth in 

production between 2011 and 2013 consisted of lighter sweet crude 

oils.17 EIA also forecasts that lighter crude oils will make up a significant 

portion of production growth in 2014 and 2015—about 60 percent.

 17The 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 9 GAO-14-807 Crude Oil

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.

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 
Page 10 GAO-14-807 Crude Oil

historically lower prices of heavier crude oils.18 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.

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 as 

follows:

• 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. There may be dwindling amounts of 

light crude oil imports that can be reduced in the future, according to 

EIA.

• Increased crude oil exports: As discussed above, crude oil exports 

have increased recently, from less than 30 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 API gravity of crude oil used in U.S. refineries 

increased from 30.2 degrees in 2008 to 30.8 degrees in 2013. 

Continued shifts to use additional lighter crude oils at domestic 

refineries can be enabled by investments to relieve constraints 

associated with refining lighter crude oils at refineries that were 

optimized to refine heavier crude oils.

• 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 

 18In 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 11 GAO-14-807 Crude Oil

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

utilization of refineries that are already running at high rates.

The studies we reviewed and stakeholders we interviewed generally 

suggest some domestic crude oil prices would increase if crude oil export 

restrictions were removed, while consumer fuel prices could decrease, 

although the extent of consumer fuel price changes are uncertain and 

may vary by region.

Studies we reviewed and most of the stakeholders we interviewed 

suggest that some domestic crude oil prices would increase if crude oil 

export restrictions were removed.19 As discussed above, increasing 

domestic crude oil production has resulted in lower prices of some 

domestic crude oils compared with international benchmark crude oils.20

Three of the studies we reviewed also said 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 

 19Stakeholders we interviewed include 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. 

20Increasing U.S. crude oil production may also have affected some global oil prices. For 

example, in 2013 U.S. crude oil production grew more than the combined increase in the

rest of the world, which contributed to relatively stable global crude oil prices in 2013, 

according to EIA. See: EIA, Today in Energy: U.S. Crude Oil Production Growth 

Contributes to Global Oil Price Stability in 2013 (Washington, D.C.: Jan. 9, 2014). 

Removing Crude Oil 

Export Restrictions Is 

Expected to Increase 

Domestic Crude Oil 

Prices and Could 

Decrease Consumer 

Fuel Prices

Some Domestic Crude Oil 

Prices Are Expected to 

Increase
Page 12 GAO-14-807 Crude Oil

domestic and international crude oils.21 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 agree that domestic crude oil prices would increase if crude 

oil export restrictions were removed, stakeholders highlighted several 

factors that could affect the extent of price increases. The studies we 

reviewed made assumptions about these factors, and actual price 

implications of removing crude oil export restrictions may differ from those 

estimated in the 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. As we recently 

found, forecasts anticipate increases in domestic crude oil production 

in the future, but the projections are uncertain and vary widely.22 Two 

of the studies and two stakeholders told us that, in the absence of 

exports, higher production of domestic light sweet crude oil would 

tend to increase the mismatch between such crude oils and the 

refining industry. In turn, 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 

 21We summarize the results of four studies: Resources for the Future (RFF), 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, March 31, 2014); IHS, US Crude Oil Export Decision: 

Assessing the impact of the export ban and free trade on the US economy (Englewood, 

CO: IHS, 2014); and NERA Economic Consulting (NERA), Economic Benefits of Lifting 

the Crude Oil Export Ban (Washington, D.C.: NERA Economic Consulting, September 9, 

2014). For additional information on these studies, see appendix I.

22Specifically, we reported on three forecasts, from the International Energy Agency (IEA), 

IHS Global, and EIA. See, GAO-14-249. 
Page 13 GAO-14-807 Crude Oil

stakeholder told us the domestic refining industry could provide 

sufficient capacity to absorb additional future crude oil production. 

This stakeholder said that refineries have the capacity to refine 

another 400,000 barrels a day of light crude oil, some of which is not 

being used because of infrastructure or logistics constraints. The 

industry is planning to develop or is in the process of developing the 

capacity to process an additional 500,000 barrels a day of light crude 

oil, according to this stakeholder. The current capacity that is not 

being utilized plus capacity that is planned or in development would 

constitute a total capacity to refine 900,000 barrels per day of light 

crude oil. To the extent that light crude oil production increases by 

less than this amount, the gap in prices between WTI and Brent could 

close in the future as increased crude oil supplies are absorbed.23

This would reduce the extent to which domestic crude oil prices 

increase if crude oil export restrictions are removed. 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. 

• 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. Recently, 

two companies received clarification from the Department of 

Commerce that condensate—a type of light crude oil24—that has been 

processed through a distillation tower is not considered crude oil and 

 23For example, EIA estimates that light crude oil production may increase by 513,000 

barrels per day in 2015. (See: EIA, U.S. Crude Oil production Forecast-Analysis of Crude 

Types (Washington, D.C.: May 29, 2014). 

24Specifically, the Department of Commerce’s definition of crude oil includes condensates, 

which are light liquid hydrocarbons recovered primarily from natural gas wells.
Page 14 GAO-14-807 Crude Oil

so not subject to export restrictions.25 One stakeholder stated that this 

may lead to more condensate exports than expected.26

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 range from about 

$2 to $8 per barrel.27 For comparison, at the beginning of June 2014, WTI 

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

price. In addition, NERA 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. According to NERA, current production costs are close to these 

values, so that removing export restrictions would provide little incentive 

to produce more light crude oil. 

 25Specifically, 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 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.

26This clarification provided by the Department of Commerce occurred after the 

publication of the RFF, ICF International, and IHS studies and thus this was not taken into 

consideration in the studies. NERA also did not consider the potential effect of the 

clarification in its study. 

27Unless 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 project larger price effects in the near term that decline over 

time.
Page 15 GAO-14-807 Crude Oil

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

Resources for the 

Future ICF International IHS 

NERA

U.S. crude 

oil price

Midwest refiner 

acquisition costs 

increase $6.68 per 

barrel

WTI prices $2.35 to $4.19 per 

barrel higher on average from 

2015-2035 a

$7.89 per barrel higher 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.b

Sources: GAO analysis of Resources for the Future, ICF International, IHS, and NERA studies. | GAO-14-807

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 discussed in this report.

b

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. NERA also found that removing crude oil export restrictions would have no 

measurable effect in the low world oil price case. 

The studies we reviewed and most of the stakeholders we interviewed 

suggest that consumer fuel prices, such as gasoline, diesel, and jet fuel, 

could decrease as a result of removing crude oil export restrictions. A 

decrease in consumer fuel prices could occur because they tend to follow 

international crude oil prices rather than domestic crude oil prices, 

according to the studies and most of the stakeholders. If domestic crude 

oil exports caused international crude oil prices to decrease, consumer 

fuel prices could decrease as well.28 Table 2 shows that the estimates of 

the price effects on consumer fuels vary in the four studies we reviewed. 

Price estimates range from a decrease of 1.5 to 13 cents per gallon. 

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

gasoline price at the beginning of June 2014. In addition, NERA found 

that removing export restrictions has no measurable effect on consumer 

fuel prices in a case that assumes a low future world crude oil price. 

 28RFF 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).

Consumer Fuel Prices 

Could Decrease, but 

Effects May Vary by 

Region
Page 16 GAO-14-807 Crude Oil

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

Resources for the 

Future ICF International IHS NERA

U.S. Consumer 

Fuel Prices

a

Gasoline prices decline 

by 1.8 to 4.6 center per 

gallon on average 

Petroleum product prices 

decline by 1.5 to 2.4 cents 

per gallon on average from 

2015-2035

Gasoline prices decline 

by 9 to 13 cents per 

gallon on average from 

2016-2030

Petroleum product prices 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 

decline by 3 cents per gallon in 

the reference case and 10 cents 

per gallon in the high case.

Sources: GAO analysis of Resources for the Future, ICF International, IHS, and NERA studies. | GAO-14-807

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. NERA also found that removing crude oil export restrictions has no 

measurable effect in the world crude oil low price case. 
Page 17 GAO-14-807 Crude Oil

The effect of removing crude oil export restrictions on domestic consumer 

fuel prices depends on several uncertain factors. First, it depends on the 

extent to which domestic versus international crude oil prices determine 

the domestic price of consumer fuels. Recent research 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.29 This research supports the 

assumption made in all of the 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.

Second, the extent to which domestic consumer fuel prices could decline 

also depends on how the global crude oil market responds to the 

domestic crude oil entering the market. In this regard, stakeholders 

highlighted several uncertainties. In particular, the response of the 

Organization of the Petroleum Exporting Countries (OPEC) could have a 

large influence on any international crude oil price changes. The 

projections in the RFF, IHS, and ICF International studies assumed that 

OPEC would not respond by attempting to counterbalance the effect of 

increased U.S. exports by reducing its countries’ exports. However, 

OPEC could seek to maintain international crude oil prices by pulling 

crude oil from the global market. In this case, the international crude oil 

price would not be affected by removing export restrictions, and 

consumer fuel prices would not decline. On the other hand, OPEC could 

increase production to maintain its large market share, which would push 

international crude oil prices and consumer fuel prices downward. NERA 

examined two alternative OPEC response cases, and found that gasoline

prices would not generally be affected if OPEC reduces production, and 

that consumer fuel prices would decrease further if OPEC maintains its 

production in the face of lower global crude oil prices. In addition, one 

stakeholder questioned whether international crude oil prices would be 

affected by U.S. crude oil exports. Given the size of the global crude oil 

market, this stakeholder suggested that U.S. exports would have little to 

no effect on international crude oil prices.

 29See 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).

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-14-807

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 18 GAO-14-807 Crude Oil

Third, 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, 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.30 Specifically, representatives of one refiner 

told us that, if exports 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 closure, especially those located

in the Northeast. As EIA reported in 2012, refinery closures in the 

Northeast could be associated with higher consumer fuel prices and 

possibly higher price volatility.31 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.

 30The 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. 

31EIA, Potential Impacts of Reductions in Refinery Activity on Northeast Petroleum 

Product Markets (Washington, D.C.: May 11, 2012).
Page 19 GAO-14-807 Crude Oil

The studies we reviewed and stakeholders we interviewed generally 

suggest that removing crude oil export restrictions would increase 

domestic crude oil production and may affect the environment and the 

economy.

Studies we reviewed and stakeholders we interviewed generally agree 

that removing crude oil export restrictions would increase domestic crude 

oil production. Monthly domestic crude oil production has increased by 

almost 68 percent since 2008—from an average of about 5 million barrels 

per day in 2008 to 8.3 million barrels per day in April 2014. Even with 

current crude oil export restrictions, given various scenarios, EIA projects 

that domestic production will continue to increase and could reach 9.6 

million barrels per day by 2019.32 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 between 2015 and 2035, according to the ICF International 

study, to a high of an additional 3.3 million barrels per day on average 

 32U.S. crude oil production grows from 2012 through 2019 in EIA’s Reference scenario, 

peaking at more than 9.6 million barrels per day—about 3.1 million barrels per day above 

the 2012 total and close to the historical high of 9.6 million barrels per day in 1970. 

However, EIA projects declines in later years. EIA examined several alternative scenarios, 

including a High Oil and Gas Resource scenario, where growth in oil production continues 

for a longer period of time than projected in the Reference scenario. Domestic crude oil 

production increases to nearly 13 million barrels per day before 2035 in this scenario. EIA 

also examined a Low Oil and Gas Resource scenario reflecting uncertainty about tight oil 

and shale crude oil and natural gas resources, leading to lower domestic production than 

in the Reference scenario. In the latter, production reaches 9.1 million barrels per day in 

2017 before falling to 6.6 million barrels per day in 2040 (Energy Information 

Administration. Annual Energy Outlook 2014. May 7, 2014. See: 

http://www.eia.gov/forecasts/aeo/MT_liquidfuels.cfm.)

Removing Crude Oil 

Export Restrictions Is 

Expected to Increase 

Domestic Production 

and Have Other 

Effects

Removing Export 

Restrictions Is Expected to 

Increase Domestic 

Production, but 

Projections Vary
Page 20 GAO-14-807 Crude Oil

between 2015 and 2035 in NERA’s study.33 This is equivalent to 1.5 

percent to almost 40 percent of production in April 2014.

One stakeholder we spoke with told us that, although domestic demand 

for crude oil is not expected to change, production will rise as a result of 

increased international demand, primarily from Asia. For example, 

according to EIA, India was the fourth-largest consumer of crude oil and 

petroleum products in the world in 2013, and the country’s dependence 

on imported crude oil continues to grow.34 Another stakeholder stated that 

removing export restrictions could lead to increased local and regional 

opposition to crude oil production if the crude oil was primarily for export, 

which could affect domestic production.

Two of the studies we reviewed and most stakeholders we spoke with 

stated that the increased crude oil production that would result from 

removing the restrictions on crude oil exports may affect the environment. 

In September 2012, 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 depend on various location- and process-specific factors, including 

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

it occurs, as well as geology, climate, business practices, and regulatory 

and enforcement activities.35 The stakeholders who raised concerns 

identified the following risks related to crude oil production, about which 

GAO has reported in the past:

• Water quality and quantity: Increased crude oil production, 

particularly from shale, could affect the quality and quantity of surface 

and groundwater sources, but the magnitude of such effects is 

 33In addition, RFF 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. RFF 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. (See app. I for additional 

information.)

34U.S. Department of Energy. Energy Information Administration. Country Report: India.

See: http://www.eia.gov/countries/country-data.cfm?fips=IN. June 26, 2014.

35GAO-12-732.

Removing Export 

Restrictions Is Expected to 

Affect the Environment
Page 21 GAO-14-807 Crude Oil

unknown. In October 2010, we found that water is needed for a 

number of oil shale development activities, including constructing 

facilities, drilling wells, generating electricity for operations, and 

reclamation of drill sites.36 In 2012, we found that shale oil and gas 

development may pose a risk to surface water and groundwater 

because withdrawing water from streams, lakes, and aquifers for 

drilling and hydraulic fracturing could adversely affect water 

resources.37 For example, we found that groundwater withdrawal 

could affect the amount of water available for other uses, including 

public and private water supplies. One of the stakeholders we 

interviewed suggested that water withdrawal is already an important 

consideration, particularly for areas experiencing drought. For 

example, the stakeholder noted that crude oil production and 

associated water usage already has implications for the Edwards 

Aquifer, a groundwater system serving the agricultural, industrial, 

recreational, and domestic needs of almost two million users in south 

central Texas. In addition, removing export restrictions may affect 

water quality. Another stakeholder told us that allowing crude oil 

exports would lead to more water pollution as a result of increased 

production through horizontal drilling.

• Air quality: Increased crude oil production may increase greenhouse 

gases and other air emissions because the use of consumer fuels 

would increase, and also because the crude oil production process 

often involves the direct release of pollutants into the atmosphere 

(venting) or burning fuels (flaring).38 Two stakeholders told us that 

 36We found, for example, that water is needed for five distinct groups of activities that 

occur during the life cycle of oil shale development: (1) extraction and retorting, (2) 

upgrading of shale oil, (3) reclamation, (4) power generation, and (5) population growth 

associated with oil shale development. We reviewed a set of studies that indicated that the 

expected total water needs for the entire life cycle of oil shale production ranged from 

about 1 barrel (or 42 gallons) to 12 barrels of water per barrel of oil produced from in situ 

(underground heating) operations, with an average of about 5 barrels, and from about 2 to 

4 barrels of water per barrel of oil produced from mining operations with surface heating. 

See GAO, Energy-Water Nexus: A Better and Coordinated Understanding of Water 

Resources Could Help Mitigate the Impacts of Potential Oil Shale Development, 

GAO-11-35 (Washington, D.C.: Oct. 29, 2010).

37GAO-12-732. 

38Burning natural gas is known as flaring, while releasing natural gas directly into the 

atmosphere is called venting. In 2004, we found that venting and flaring have adverse 

environmental effects and result in loss of a significant amount of energy. In areas where 

the primary purpose of drilling is to produce oil, producers flare or vent because no local 

market exists for the gas. See GAO, Natural Gas Flaring and Venting: Opportunities to 

Improve Data and Reduce Emissions, GAO-04-809 (Washington, D.C.: July 14, 2004).
Page 22 GAO-14-807 Crude Oil

venting and flaring has escalated in North Dakota, in part because 

regulatory oversight and infrastructure have not kept pace with the 

recent surge in crude oil production in the state. In January 2014, the 

North Dakota Industrial Commission reported that nearly 30 percent of 

all natural gas produced in the state is flared. According to a 2013 

report from Ceres, flaring in North Dakota in 2012 resulted in 

greenhouse gas emissions equivalent to adding 1 million cars to the 

road.39 Another stakeholder told us that allowing crude oil exports 

would lead to more air pollution as a result of increased production 

through horizontal drilling and hydraulic fracturing. RFF estimated the 

potential environmental effect of removing export restrictions, 

estimating that increases in crude oil production and consumption 

would increase carbon dioxide emissions worldwide by almost 22 

million metric tons per year.40 By comparison, U.S. emissions from 

energy consumption totaled 5,393 million metric tons in 2013 

according to EIA. NERA estimated that increased crude oil production 

and use of fossil fuels would increase greenhouse gas emissions by 

about 12 million metric tons of carbon dioxide equivalents per year on 

average from 2015 through 2035.

41 

• Transportation challenges: Increased crude oil production could 

exacerbate transportation challenges. In March 2014, we found that 

 39Ceres, Flaring Up: North Dakota Natural Gas Flaring More Than Doubles in Two Years

(July 2013). Ceres is a nonprofit organization.

40According to the Environmental Protection Agency, carbon dioxide is the primary 

greenhouse gas emitted through human activities. Further, the main human activity that 

emits carbon dioxide is the combustion of fossil fuels (coal, natural gas, and oil) for energy 

and transportation. 

41Carbon dioxide equivalents provide a common standard for measuring the warming 

potential of different greenhouse gases and are calculated by multiplying the emissions of 

the non-carbon dioxide gas by its global warming potential, a factor that measures its 

heat-trapping ability relative to that of carbon dioxide. The NERA study suggests that 

maintaining crude oil export restrictions could be a relatively costly means of constraining 

greenhouse gas emissions. The authors calculated that the cost per ton of avoided 

emissions using crude oil export restrictions range from about $1,200 to $1,400 per ton of 

carbon dioxide in one case, and about $900 to $1,000 per ton in another case (in 2013 

dollars). The authors stated that these costs are higher than government estimates of the 

benefits of reducing carbon dioxide emissions—in 2013, an interagency working group 

estimated the benefits of avoided emissions ranged from $37 to $56 per metric ton of 

carbon dioxide from 2015 through 2035 (in 2007 dollars at a 3 percent discount rate). See: 

Interagency Working Group on the Social Cost of Carbon, United States Government, 

Technical Support Document: Technical Update of the Social Cost of Carbon for 

Regulatory Impact Analysis – Under Executive Order 12866 (Washington, D.C.: May 

2013, revised November, 2013). 
Page 23 GAO-14-807 Crude Oil

domestic and Canadian crude oil production has created some 

challenges for U.S. crude oil transportation infrastructure. Some of the 

growth in crude oil production has been in areas with limited 

transportation to refining centers.42 To address this challenge, refiners 

have relied on rail to transport crude oil. According to data from the 

Surface Transportation Board, rail moved about 236,000 carloads of 

crude oil in 2012, which is 24 times more than the roughly 9,700 

carloads moved in 2008. As we recently found, as the movement of 

crude oil by rail has increased incidents such as spills and fires 

involving crude oil trains have also increased—from 8 incidents in 

2008 to 119 incidents in 2013 according to Department of 

Transportation data.43 Some stakeholders told us that removing 

export restrictions would increase the risk for crude oil spills by rail 

and other modes of transportation such as tankers. On the other 

hand, one stakeholder suggested that removing export restrictions 

could reduce the amount of crude oil transported by rail, in some 

instances, since the most economic way to export crude oil is by 

pipeline to a tanker. As a result, the number of rail accidents involving 

crude oil spills could decrease.

The studies we reviewed suggest that removing crude oil export 

restrictions would increase the size of the economy. Three of the studies 

project 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 

 42GAO-14-249.

43Department of Transportation data show that the majority of the 2013 incidents were 

small; however, two incidents in 2013, in Aliceville, Alabama, and Casselton, North 

Dakota, resulted in large spills and greater damage. Significant incidents have continued 

to occur in 2014, including an April derailment and fire in Lynchburg, Virginia. The 

Department of Transportation Pipeline and Hazardous Materials Safety Administration’s 

incident database can be searched at 

https://hazmatonline.phmsa.dot.gov/IncidentReportsSearch/ (accessed June 12, 2014).

GAO, Oil and Gas Transportation: Department of Transportation Is Taking Actions to 

Address Rail Safety, but Additional Actions are Needed to Improve Pipeline Safety, GAO14-667 (Washington, D.C.: August 21, 2014).

Removing Export 

Restrictions Is Expected to 

Affect the Economy
Page 24 GAO-14-807 Crude Oil

the rest of the economy.44 For example, NERA projects an average of 

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

through 2020 if export restrictions were eliminated in 2015.

45 These 

employment benefits largely disappear if export restrictions are not 

removed until 2020 because by then the economy will have returned to 

full employment. Potential implications for investment, public revenue, 

and trade are as follows:

• Investments: According to one of the studies we reviewed, removing 

export restrictions may lead to more investment in crude oil 

exploration and production, but this investment could be somewhat 

offset by less investment in the refining industry. As discussed 

previously, removing export restrictions is expected to increase 

domestic crude oil production. Private investment in drilling rigs, 

engineering services, and transportation and logistics facilities, for 

example, is needed to increase domestic crude oil production. 

According to IHS, this will directly benefit industries such as 

machinery, fabricated metals, steel, chemicals, and engineering 

services. At the same time, removing export restrictions may 

decrease investment in the refining industry because the industry

would not need extensive additional investment to accommodate 

lighter crude oils. For example, one stakeholder told us that, under 

current export restrictions, refining additional light crude oils may 

require capital investment to remove processing constraints at 

refineries that are designed to process heavier crude oils. Officials 

from one refining company told us that they had invested a significant 

amount of capital to refine lighter oils. For example, the refinery 

installed two new distillation towers to process lighter crude oils at a 

cost of $800 million. Such investments may not be necessary if export 

restrictions were removed.

 44Growth 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).

45According to NERA, 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 25 GAO-14-807 Crude Oil

• Public revenue: Two of the studies we reviewed suggest 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 while 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.

• Trade: According to the studies we reviewed, removing export 

restrictions would contribute to further declines in net petroleum (i.e., 

crude oil, consumer fuels, and other petroleum products) imports and 

reduce the U.S. trade deficit. Three of the studies we reviewed 

estimated the effect of removing export restrictions on net petroleum 

imports, with ICF projecting a decline in net imports of about 100,000 

to 300,000 barrels per day; IHS projecting a decline, but not providing 

a specific estimate; and NERA projecting a decline of about 0.6 to 3.2

million barrels per day. Further, according to one study, removing 

export restrictions could also improve the U.S. trade balance because 

the light sweet crude oils are usually priced higher than heavy, sour 

crude oils. One study estimated that removing export restrictions 

could improve the trade balance (narrow the U.S. trade deficit) by $8 

to $15 billion per year on average from 2015 through 2035. Another 

study estimated that removing crude oil export restrictions would 

improve the trade balance by $72 to $101 billion per year from 2016 

through 2030.

Changing market conditions—most importantly the significant increase in 

domestic production of crude oil from shale—have implications for the 

role of the SPR, including its appropriate size, location, and composition. 

DOE has taken some steps to reexamine the location and composition of 

the SPR in light of these changes, but has not recently reexamined its 

size.

Recent and expected changes in crude oil markets have important 

implications for the role of the SPR, including its size, location, and 

composition. DOE has recognized that recent increases in domestic 

crude oil production and correlating reductions in crude oil imports have 

changed how crude oil is transported around the United States, and that 

these changes carry potential implications for the operation and 

maintenance of the SPR. As discussed above, removing crude oil export 

Changing Market 

Conditions Raise 

Questions about the 

Size, Location, and 

Composition of the 

SPR

Changing Crude Oil 

Market Conditions Affect 

the SPR
Page 26 GAO-14-807 Crude Oil

restrictions would be expected to increase domestic crude oil production 

and contribute to further declines in net imports. Our review of DOE 

documents, prior GAO work, and discussions with stakeholders highlight 

three primary implications for the SPR.

Size: Increased domestic crude oil production and falling net petroleum 

imports may affect the ideal size of the SPR—how much the SPR should 

hold to optimize the benefits of protecting the economy from damage with 

the costs of holding the reserves. One measure of the economy’s 

vulnerability to oil supply disruptions is to assess net petroleum imports—

imports minus exports. Net petroleum imports have declined from a peak 

of 60 percent of consumption in 2005 to about 30 percent in the first half 

of 2014. In 2006, net imports were expected to increase in the future, 

increasing the country’s reliance on foreign crude oil. However, imports 

have declined and, according to EIA’s most recent forecast, are expected 

to remain well below 2005 import levels into the future. (See fig. 3.) As 

discussed above, removing crude oil export restrictions would be 

expected to contribute to additional decreases in net petroleum imports in 

the future.

To the extent that changes in net imports reflect changes in vulnerability, 

these and other changes in the economy may have reduced the nation’s 

vulnerability to supply disruptions. For example, a recent report by the 

President’s Council of Economic Advisers suggests that decreased 

domestic petroleum demand, increased domestic crude oil production, 

more fuel efficient vehicles, and increased use of biofuels, have each 

contributed to reducing the vulnerability of the nation’s economy to 

international crude oil supply disruptions.46 Although international crude 

oil supply and price volatility remains a risk, the report suggests that

additional reductions in net petroleum imports could reduce those risks in 

the future. In addition, the SPR currently holds oil in excess of 

international obligations. As a member of the IEA, the United States is 

required to maintain reserves of crude oil or petroleum products equaling 

at least 90 days of net imports, which it does with a combination of public 

and private reserves. According to IEA, as of May 2014, the SPR held 

106 days of net imports, and private reserves held an additional 141 days 

of imports for a total of 247 days—well above the 90 days required by the 

 46President’s Council of Economic Advisers, The All-of-the-Above Energy Strategy as a 

Path to Sustainable Economic Growth. Executive Office of the President. May 2014.
Page 27 GAO-14-807 Crude Oil

IEA.47 In light of these factors, some of the stakeholders we interviewed 

raised questions about whether such a large SPR is needed in the future. 

For example, one stakeholder indicated that SPR crude oil is surplus and 

no longer needed to protect the economy. However, other stakeholders 

highlighted the importance of maintaining the SPR. For example, one 

stakeholder said that the SPR should be maintained at the current level, 

and another said that the SPR serves an important “energy insurance” 

service. DOE officials and one other stakeholder highlighted that, in 

addition to net imports, there are other factors that may affect the 

appropriate size of the SPR.48

 47According to IEA, all reserves held by industry count towards meeting a country’s IEA 

reserve commitment. Most member governments require certain companies, such as 

importers, refiners, product suppliers or wholesalers, to hold a minimum number of days of 

reserves. However, 9 countries, including the United States, do not place such a 

requirement on industry. According to DOE officials, commercial entities set their reserves 

based on the economic principle of inventory minimization and require a large portion of 

the reserves they hold to keep their logistical systems moving. These reserves may 

therefore not be available to address a supply disruption in the same way as mandated 

industry reserves or public reserves.

48DOE officials cited several studies to show the diversity of views in this regard, and 

noted that most of the literature on the effect of supply disruptions on the economy does 

not focus on net imports, and that this is an area of active research. According to DOE, 

the literature shows that the United States is still vulnerable to oil price shocks as these 

can cause dislocations within key economic sectors. As part of this review, we did not 

assess the validity of the studies. For example, see: J.D. Hamilton, “Causes and 

Consequences of the Oil Shock of 2007-08,” Brookings Papers on Economic Activity, 

Spring 2009: 215-261; L. Kilian, “The Economic Effects of Energy Price Shocks,” Journal 

of Economic Literature 46, no.4(2008): 871-909.
Page 28 GAO-14-807 Crude Oil

Figure 3: U.S. Net Petroleum Imports, Historical (1970-2013) and Energy Information Administration Forecasts

Note: Forecast data are the 2006 and 2014 Annual Energy Outlook reference scenarios.

Location: According to DOE, changes in how crude oil is transported 

throughout the United States and in the existing infrastructure 

surrounding SPR facilities have implications for the location of the SPR. 

Crude oil in the SPR is stored along the Gulf Coast, where it can take 

advantage of being in close proximity to a major refining center, as well 

as distribution points for tankers, barges, and pipelines that can carry 

crude oil from the SPR to refineries in other regions of the country. Most 

of the system of crude oil pipelines in the United States was constructed 

in the 1950s, 1960s, and 1970s to accommodate the needs of the refining 

sector and demand centers at the time. According to DOE officials, the 

existing infrastructure was designed primarily to move crude oil from the 

southern United States to the North. The SPR has historically been able 

to rely on this distribution system to reach a large portion of the nation’s 

refining capacity. But, with increases in crude oil production in the 

Northern U.S. and imports of crude oil from Canada, the distribution 

system has changed to increase crude oil flows south to the Gulf Coast. 

Such changes include new pipeline construction and expansions, flow 

reversals in existing pipelines, and increased utilization of terminals and 
Page 29 GAO-14-807 Crude Oil

marine facilities. Such changes may make it more difficult to move crude 

oil from the SPR to refineries in certain regions of the United States, such 

as the Midwest, where almost 20 percent of the nation’s refining capacity 

is located, according to EIA data. Some stakeholders raised questions 

about the location of the SPR. One stakeholder also suggested that 

holding SPR crude oil in the western United States may better ensure 

access to crude oil in the case of a disruption, since the West has no 

pipeline connectivity to the Gulf Coast. According to DOE, recent changes 

to crude oil distribution in the United States could have significant 

implications for the operation and maintenance of the SPR.

Composition: In 2006, we reported that the type of crude oil in the SPR 

was not compatible with all U.S. refineries. We reported that some U.S. 

refineries processed crude oils heavier than those stored in the SPR. We 

found that in the event of a disruption in the supply of heavy crude oil, 

refineries configured to use heavy crude oil would not be able to 

efficiently refine crude oil from the SPR and would likely reduce 

production of some petroleum products. As we reported, in such 

instances, prices for heavy crude oil products could increase, reducing 

the SPR’s effectiveness to limit economic damage.49 Refinery officials we 

spoke with noted that the SPR should contain heavier crude oils that 

domestic refineries could refine in the event of a supply disruption. Since 

our 2006 report, domestic production of light sweet crude oil has 

increased. According to EIA, roughly 96 percent of the 1.8 million-barrel 

per day growth in production from 2011 to 2013 consisted of light sweet 

grades with API gravity of 40 or above. As a result, imports of light crude 

oils have declined, and U.S. reliance on imported heavy crude oil has 

increased from 37 percent of total imports in 2008 to 50 percent of total 

imports in 2013, as shown in figure 4. However, DOE officials raised 

concerns about the prospect of storing additional heavy crude oil in the 

SPR. According to DOE officials and a 2010 report by DOE, storing heavy

crude oil in the SPR would limit the SPR’s ability to respond to nonheavy 

crude oil disruptions, such as a loss of Middle East medium sour crude 

oils. In addition, storing more heavy crude would require infrastructure 

 49GAO, Strategic Petroleum Reserve: Available Oil Can Provide Significant Benefits, but 

Many Factors Should Influence Future Decisions about Fill, Use, and Expansion, 

GAO-06-872 (Washington, D.C.: Aug. 24, 2006).
Page 30 GAO-14-807 Crude Oil

improvements.50 At the same time, DOE officials also stated that, based 

on recent conversations with refinery officials, no U.S. refineries would 

have difficulty using SPR crude oils. Another issue raised by some 

stakeholders we interviewed is that the SPR holds primarily crude oil, and 

some stakeholders told us that holding additional consumer fuels could 

be beneficial.51 Many recent economic risks associated with supply 

disruptions have originated from the refining and distribution sectors 

rather than crude oil supplies.

Figure 4: Heavier Crude Oil as a Percentage of Total U.S. Crude Oil Imports, 2008-

2013

Note: The weight 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. Data in this figure are imports of 

crude oils with 25 or lower API gravity as a share of total crude oil imports.

 50For example, according to DOE, storing heavier crude oil in the SPR would require 

upgrading the Sun Terminal, a tanker delivery location, to handle the heavier crude oil; 

building an additional pipeline from one of four storage sites to maintain current drawdown 

rates; and performing other site improvements. U.S. Department of Energy. Office of the 

Deputy Assistant Secretary for Petroleum Reserves. Strategic Petroleum Reserve: 

Updated Crude Compatibility Study. April 2010.

51DOE also operates the Northeast Home Heating Oil Reserve, which stores 1 million 

barrels of diesel fuel in Massachusetts and Connecticut. 
Page 31 GAO-14-807 Crude Oil

DOE has taken some steps to assess the appropriate location and

composition of the SPR in view of changing market conditions, but has 

not recently re-examined its size. We previously found that federal 

programs should be re-examined if there have been significant changes 

in the country or the world that relate to the reason for initiating the 

program.52 In that report, we identified a set of reexamination criteria that, 

when taken together, illustrate the issues that can be addressed through 

a systematic reexamination process. We found that many federal 

programs and policies were designed decades ago to respond to trends 

and challenges that existed at the time of their creation. Given fiscal 

constraints that we are likely to face for years to come, reexamination 

may be essential to addressing newly emergent needs without unduly 

burdening future generations of taxpayers. DOE has taken some steps to 

reexamine how recent changing market conditions could affect the 

location and composition of the SPR as follows:

• In March 2014, DOE conducted a test sale of SPR crude oil to 

evaluate the SPR’s ability to draw down and distribute SPR crude oil 

through multiple pipeline and terminal delivery points within one of its 

distribution systems.53 DOE officials told us they were reviewing the 

results of the test sale including data on the movement of crude oil 

through the system.

• DOE officials also told us they are working to establish a Northeast 

Regional Refined Petroleum Product Reserve in New York Harbor 

and New England to store refined consumer fuels. Although the 

northeast reserve will not store crude oil, it will be considered part of 

the SPR and hold 1 million barrels of gasoline at a cost of $200 

million.

• DOE officials told us that they are conducting a regional fuel resiliency 

study that will provide insights into whether there is a need for 

additional regional product reserves and, if so, where these reserves 

 5221st Century Challenges: Reexamining the Base of the Federal Government, 

GAO-05-325SP (Washington, D.C.: Feb. 1, 2005).

53According to DOE, the SPR’s oil storage facilities are grouped into three geographical 

distribution systems in the Gulf Coast: Seaway, Texoma, and Capline. Each system has 

access to one or more major refining centers, interstate crude oil pipelines, and marine 

terminals for crude oil distribution.

DOE Has Taken Steps to 

Reexamine Some Aspects 

of the SPR but Has Not 

Recently Reexamined Its 

Size
Page 32 GAO-14-807 Crude Oil

should be located and the capacity.54 We did not assess this effort 

because the study was ongoing at the time of our review.

• DOE finalized an assessment in 2010 of the compatibility of crude oil 

stored in the SPR with the U.S. petroleum refining industry. DOE 

decided against storing heavy crude oil in the SPR at the time, but 

committed to revisiting the option of storing heavy crude oil in the 

future.55

However, DOE has not recently reexamined the appropriate size of the 

SPR. DOE last issued a strategic plan for the SPR in May 2004. The plan 

outlined the mission, goals, and near-term and long-term objectives for 

the SPR.56 In 2006, we recommended that the Secretary of Energy 

reexamine the appropriate size of the SPR. In 2007, while DOE was 

planning to expand the SPR to its authorized size of 1 billion barrels, the 

Administration reevaluated the need for an SPR expansion and decided 

that the current level was adequate. In responding to our 

recommendation, DOE stated that its reexamination had taken the form of 

more “actionable items,” including not requesting expansion-funding in its 

2011 budget and canceling and redirecting prior year’s expansion funding 

to general operations of the SPR. Officials from DOE’s Office of 

Petroleum Reserves told us that the last time they conducted a 

comprehensive re-examination of the size of the SPR was in 2005. At that 

time, DOE’s comprehensive study examined the costs and benefits of 

alternative SPR sizes.57 Officials told us that they have not conducted a 

 54This study is being undertaken as part of DOE’s Quadrennial Energy Review. According 

to DOE, the Quadrennial Energy Review will provide a multiyear road map that outlines 

federal energy policy objectives, legislative proposals to Congress, executive actions, and 

resource requirements. The first installment of the review will focus on transmission, 

storage, and distribution infrastructure that links energy supplies, including crude oil, to 

intermediate users.

55U.S. Department of Energy. Office of the Deputy Assistant Secretary for Petroleum 

Reserves. Strategic Petroleum Reserve: Updated Crude Compatibility Study. April 2010.

56U.S. Department of Energy. Office of Fossil Energy. Strategic Petroleum Reserve (SPR) 

Strategic Plan. May 19, 2004.

57The report evaluates the net economic benefits of enhancing the SPR size and 

drawdown capability. DOE assessed alternative SPR sizes and drawdown capabilities 

using a numerical simulation model, considering the benefits and costs of oil stockpiling.

The evaluation included the SPR’s ability to reduce economic losses and oil import costs 

during oil shocks, and it subtracted the costs of building, filling, and operating the reserve.

See: Paul Leiby and David Bowman. Economic Benefits of Expanded Strategic Petroleum 

Reserve Size or Drawdown Capability. Final Report, Oak Ridge National Laboratory. 

ORNL/TM-2006/5. Dec. 31, 2005.
Page 33 GAO-14-807 Crude Oil

comprehensive reexamination since 2005 because the SPR only recently 

met the IEA requirement to maintain 90 days of imports. However, the 

IEA requirement is for total reserves, including those held by the 

government and private reserves. As shown in figure 5, such reserves in 

the United States are currently in excess of the nation’s international 

obligations and, in some scenarios, are expected to be in excess in the 

future. In July 2014, DOE’s Office of Inspector General recommended 

that the Office of Fossil Energy perform a long-range strategic review of 

the SPR to ensure it is best configured to respond to the current and 

future needs of the United States.58 DOE concurred with the 

recommendation. DOE stated that it expected to determine the 

appropriate course of action by August 2014, and according to DOE, it 

has initiated a process to conduct such a review. 

 58According to DOE officials, this review should take into consideration what the near-term 

and long-term role of the reserve should be relative to U.S. energy and economic security 

goals and objectives and International Energy Program requirements; what the optimal 

configuration and capabilities (e.g., composition, volume, location of petroleum products, 

infrastructure requirements, distribution capability, and performance criteria) of the 

Reserve should be; the resources required to attain and maintain the Reserve’s long-term 

sustainability (to ensure alignment with optimal configuration and capabilities); and 

whether existing legal authorities that govern the policies, configuration, and capabilities of 

the Reserve are adequate to ensure the Reserve can meet both current and future U.S. 

energy and economic security goals and objectives. U.S. Department of Energy. Office of 

Inspector General. Office of Audits and Inspections. The Strategic Petroleum Reserve’s 

Drawdown Readiness. DOE/IG-0916. July 2014. 
Page 34 GAO-14-807 Crude Oil

Figure 5: United States’ Historic and Estimated Compliance with International Energy Agency Obligation to Hold Reserves

Note: Data for 2015 and later are based on May 2014 reserve levels reported by the International 

Energy Agency and forecast changes in net imports from the Energy Information Administration’s 

(EIA) reference case forecast. EIA’s forecast includes several cases, highlighting uncertainty about 

future conditions which are not depicted in this figure.

a

As of May 2014.

The SPR currently holds oil valued at over $73 billion, and without a 

current reexamination of the SPR’s size, DOE cannot be assured that the 

SPR is sized appropriately. The SPR may therefore be at risk of holding 

excess crude oil. In addition, DOE officials told us that SPR infrastructure 

is aging and will need to be replaced soon. Conducting a reexamination 

of the size of the SPR could also help inform DOE’s decisions about how 

or whether to replace existing infrastructure. If DOE were to assess the 

appropriate size of the SPR and find that it held excess crude oil, the 

excess oil could be sold to fund other national priorities. For example, in 

1996, SPR crude oil was sold to reduce the federal budget deficit and 
Page 35 GAO-14-807 Crude Oil

offset other appropriations. If, for example, DOE found that 90 days of 

imports was an appropriate size for the SPR, it could sell crude oil worth 

about $10 billion.59

Increasing domestic crude oil production, and declines in consumption 

and crude oil imports have profoundly affected U.S. crude oil markets 

over the last decade. These changes can have important implications for 

national energy policies and programs. The SPR is a significant national 

asset, and it is important for federal agencies tasked with overseeing 

such assets to examine how, if at all, changing conditions affect their 

programs. DOE has recently taken several steps to reexamine various 

aspects of the SPR in light of these changes, including its location and 

composition; however, DOE’s most recent comprehensive examination of 

the appropriate size of the SPR was conducted in 2005 when the general 

expectation was that the country would increasingly rely on foreign crude 

oil. At about that time, however, it began to become clear that this was 

not to be the case. Removing export restrictions would be expected to 

lead to further decreases in net imports that would further affect the role 

of the SPR. Without a reexamination of the SPR that considers whether a 

smaller or larger SPR is in the national interest in light of current and 

expected future changes in market conditions, DOE cannot be assured 

that the SPR is holding an appropriate amount of crude oil in the SPR, 

and its ability to make appropriate decisions regarding maintenance of the 

SPR could be compromised.

In view of recent changes in market conditions and in tandem with DOE’s 

ongoing activities to assess the content, connectivity, and other aspects 

of the SPR, we recommend that the Secretary of Energy undertake a 

comprehensive reexamination of the appropriate size of the SPR in light 

of current and expected future market conditions.

We provided a draft of this report to DOE and Commerce for their review 

and comment. The agencies provided technical comments, which we 

incorporated as appropriate. In its written comments, reproduced in 

 59Calculated based on DOE’s assessment of the weighted average price of crude oil held 

in the SPR as of May 28, 2014. 

Conclusions

Recommendation for 

Executive Action

Agency Comments 

and Our Evaluation
Page 36 GAO-14-807 Crude Oil

appendix III, DOE concurred in principle with our recommendation. 

However, DOE stated that conducting a study of only the size of the SPR 

would be too narrow in scope and would not address other issues 

relevant to the SPR carrying out its mission of providing energy security 

to the United States. DOE stated that a broader, long-range review of the 

SPR is needed. We agree that such a review would be beneficial. We do 

not recommend that DOE undertake an isolated reexamination of the size 

of the SPR, but that such a reexamination be conducted in tandem with 

DOE’s other activities to assess the SPR and we clarified our 

recommendation accordingly. 

As agreed with your office, unless you publicly announce the contents of 

this report earlier, we plan no further distribution until 30 days from the 

report date. At that time, we will send copies to the appropriate 

congressional committees, the Secretaries of Energy and Commerce, 

and other interested parties. In addition, the report will be available at no 

charge on the GAO website at http://www.gao.gov.

If you or your staff members have any questions about this report, 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 report. GAO staff who made key contributions to this 

report are listed in appendix IV.

Sincerely yours,

Frank Rusco

Director, Natural Resources and Environment
Appendix I: Additional Information on Four 

Studies of the Implications of Removing Crude 

Oil Export Restrictions

Page 37 GAO-14-807 Crude Oil

We identified four studies that examined the price and other implications 

of removing crude oil export restrictions. These four studies are as 

follows:

• Resources for the Future (RFF). 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, March 31, 2014.

• IHS. US Crude Oil Export Decision: Assessing the impact of the 

export ban and free trade on the US economy. Englewood, Colorado: 

IHS, 2014.

• NERA Economic Consulting (NERA). Economic Benefits of Lifting the 

Crude Oil Export Ban. Washington, D.C.: NERA Economic 

Consulting, September 9, 2014.

Table 3 describes these studies and several key assumptions, Table 4 

summarizes their findings regarding prices, and Table 5 summarizes their 

findings regarding other implications of removing crude oil export 

restrictions.

Appendix I: Additional Information on Four

Studies of the Implications of Removing 

Crude Oil Export Restrictions
Appendix I: Additional Information on Four 

Studies of the Implications of Removing Crude 

Oil Export Restrictions

Page 38 GAO-14-807 Crude Oil

Table 3: Description of Approach and Key Assumptions in Four Studies on the Implications of Removing Crude Oil Export 

Restrictions

Resources for the 

Future ICF International IHS NERA

Sponsor Resources for the Future American Petroleum 

Institute 

Several oil companies. The Brookings Institution

Description of 

approach

Using a small static 

simulation model 

calibrated to world oil 

market conditions for 

2012, assessed long-run 

implications of removing 

export restrictions 

assuming crude oil prices 

change to reflect only 

crude oil qualities.

Used a detailed 

integrated U.S. and global 

refining and logistics 

model together with a 

detailed assessment of 

crude oil production and 

supply and demand 

changes. Modeled a 

complete lifting of export 

restrictions in 2015 and 

two cases with different 

assumptions about how 

hard it will be to 

accommodate increases 

in crude oil production.

A bottom up study of

crude oil production, 

refining, and international 

markets. Examined two 

outlooks for U.S. crude oil 

production—a base case 

based on known 

production areas and 

limited technological 

improvements; and a 

more optimistic case that 

includes additional 

production areas and 

technological 

improvements. a

Used a partial equilibrium 

model of the petroleum 

industry to estimate crude 

oil production, refining, 

consumption, and trade 

effects; and a computable 

general equilibrium model

of the U.S. economy to 

assess economic effects. 

Modeled eighteen cases 

including a reference 

case and a high oil and 

gas resources case.b

Time period covered 

in analysis

 

Modeled long run 

adjustment, not specific 

years. 

2015-2035 2016-2030 2015-2035

Detailed modeling of 

crude oil production?

No Yes Yes No

Detailed modeling of 

refineries?

No Yes Yes Yes

Transportation 

network model?

No Yes Yes Yes

Crude oil production 

response from OPEC 

and other producers

Assumed long run world 

crude oil supply elasticity 

of 0.4 based on literature. 

No significant OPEC 

response modeled. 

Assumed world supply 

response derived from 

EIA Annual Energy 

Outlook sensitivity cases. 

OPEC production would 

decline by 50,000 barrels 

per day from 2015 

through 2035 without 

export restrictions.

We were unable to 

determine IHS’ 

assumption regarding the 

crude oil production 

response of other nations.

Examined three cases of 

OPEC responses: 1) 

OPEC competes in the 

market; 2) OPEC 

maintains crude oil 

exports and 3) OPEC cuts 

crude oil exports to 

maintain crude oil price.

Sources: GAO analysis of Resources for the Future, ICF International, IHS, and NERA studies | GAO-14-807.

a

ICF assessed two cases; a low case that assumed relatively rapid accommodation of light crude oil, 

and a high case that assumed slower adaptations to changing crude oil production than were 

assumed in the low case. In the high case, the resulting differences in prices between domestic and 

international crude oils would remain wide for a longer period of time.

b

NERA's reference case assumes U.S. crude oil production peaks in the early part of the next decade 

and declines thereafter, while the "high oil and gas resources" case represents a more optimistic and 

sustained view of future production. NERA examined a total of 18 cases with alternative assumptions 

about (1) future U.S. crude oil production, (2) the international crude oil market, (3) the status, timing, 

and scope of export restrictions; and (4) OPEC's response to changes in U.S. export restrictions.
Appendix I: Additional Information on Four 

Studies of the Implications of Removing Crude 

Oil Export Restrictions

Page 39 GAO-14-807 Crude Oil

Table 4: Summary of Price Implications of Removing Crude Oil Export Restrictions in Four Studies 

Resources for the Future ICF International IHS NERA

U.S. Crude Oil 

Price

a

Midwest refiner acquisition 

costs increase $6.68 per 

barrel.

West Texas Intermediate 

prices increase $2.35 to 

$4.19 per barrel on 

average.

$7.89 per barrel increase 

on average.

Prices increase $1.74 per 

barrel in the reference 

case and $5.95 per barrel 

in the high case, on 

average.

International Crude 

Oil Prices

Prices increase outside the 

Midwest by $0.15 per 

barrel.

Price of Brent declines by 

$0.37 to $0.79 per barrel 

on average. 

Brent average price 

declines by $3.24-5.41. 

International average 

crude oil prices decline by 

$1.31 per barrel in the 

reference case and $6.23

per barrel in the high case.

U.S. Consumer 

Fuel Prices

Gasoline prices decline by 

1.8 to 4.6 cents per gallon 

on average. 

Petroleum product prices 

decline by 1.5 to 2.4 cents 

per gallon on average. 

Gasoline prices decline by 

9 to 13 cents per gallon on 

average.

Petroleum product prices 

decline by 3 cents per 

gallon in the reference 

case and 11 cents per 

gallon in the high case. 

Gasoline prices decline by 

3 cents per gallon in the 

reference case and 10

cents per gallon in the high 

case.

Sources: GAO analysis of Resources for the Future, ICF International, IHS, and NERA studies | GAO-14-807.

Note: Price implications in this table are for the period covered in each study. For Resources for the 

Future, this is the long run price implication; for ICF International and NERA, it is the average from 

2015 through 2035; and for IHS, it is the average from 2016 through 2030. Estimates are in 2014 

year dollars.

a

Results 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.

NERA also found that removing crude oil export restrictions has no measurable effect in the world oil 

low price case. 
Appendix I: Additional Information on Four 

Studies of the Implications of Removing Crude 

Oil Export Restrictions

Page 40 GAO-14-807 Crude Oil

Table 5: Summary of Other Implications of Removing Crude Oil Export Restrictions in Four Studies

Resources For the 

Future ICF International IHS NERA

Domestic Crude Oil 

Production

a

Canada and the Midwest: 

increase by 84,000 

barrels per day (bpd).

Rest of the World: 

increase by 54,000 bpd.

Total world production will 

increase by 138,000 bpd. 

Increases 130,000 bpd on 

average in the low 

scenario (10.6 to 10.7 

million bpd) and 300,000 

bpd in the high scenario 

(10.4 to 10.7 million bpd).

Increase of 1.2 million bpd 

in the low case (9.5 to 

10.7 million bpd) to 2.3 

million bpd in the high 

case (11 to 13.3 million 

bpd).

Increase of 0.7 million 

bpd, on average, in the 

reference case and 3.3

million bpd in the high 

case.

Oil Industry 

Investments

Not addressed. Additional $16 to $73 

billion in additional crude 

oil production related 

investment between 2015 

and 2020, and a decline 

in refining investment of 

$5 to $7 billion from 2015-

2035.

Net cumulative 

investment increases by 

$806 billion to $1.1 trillion 

from 2016-2030.

Increases by $1.08 billion 

per year on average in 

the reference case and

$26.81 billion per year in 

the high case from 2015

through 2035.

Environmental 

Implications

b

Carbon dioxide emissions 

would increase by 22 

million metric tons per 

year. 

Not addressed. Not addressed. Greenhouse gas 

emissions increase by 12 

million metric tons of 

carbon dioxide 

equivalents per year.

Trade Implications Would improve trade 

balance, though not 

estimated.

Volumes: Decline in net 

crude oil imports of 

26,000-200,000 bpd and 

decline in net petroleum 

product imports of nearly 

93,000 bpd.

Balance of trade: 

Increases by $8 to $15 

billion.

Volumes: Project a 

decline in net imports, 

specific amount not 

provided.

Balance of trade: 

Increases net petroleum 

trade by $72-$101 billion 

per year. 

Volumes: Decline in net 

crude oil and petroleum 

product imports of 0.63

million bpd in the 

reference case and 3.15

million bpd in the high 

case.

Sources: GAO analysis of Resources for the Future, ICF International, IHS, and NERA studies. | GAO-14-807

Notes: Implications in this table are for the period covered in each study. For Resources for the 

Future, this is in the long run; for ICF International and NERA, it is the average from 2015 through 

2035; and for IHS, it is the average from 2016 through 2030. Estimates are in 2014 year dollars.

a

Results 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.

NERA also found that removing crude oil export restrictions has no measurable effect in the world oil 

low price case.

b

Includes investment in oil extraction, industrial, and manufacturing sectors.
Appendix II: List of Stakeholders Interviewed

Page 41 GAO-14-807 Crude Oil

This appendix lists the stakeholders we interviewed. Stakeholders 

included 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.

1. American Fuel & Petrochemical Manufacturers

2. American Petroleum Institute

3. American Automobile Association

4. Jason Bordoff, Columbia School of International and Public Affairs

5. Severin Borenstein, University of California, Berkeley

6. Stephen Brown, Resources for the Future and University of NevadaLas Vegas

7. Citigroup

8. Deborah Gordon, Carnegie Endowment for International Peace

9. Hillard Huntington, Stanford University

10. IHS

11. ICF International and EnSys Energy

12. Kenneth Medlock, Rice University

13. NERA Economic Consulting

14. Lorne Stockman, Oil Change International

15. Philip Verleger, PKVerleger LLC

16. Dan Weiss, Center for American Progress

17. Valero Energy Corporation

Appendix II: List of Stakeholders Interviewed
Appendix III: Comments from the Department 

of Energy

Page 42 GAO-14-807 Crude Oil

Appendix III: Comments from the 

Department of Energy
Appendix III: Comments from the Department 

of Energy

Page 43 GAO-14-807 Crude Oil
Appendix IV: GAO Contact and Staff 

Acknowledgments

Page 44 GAO-14-807 Crude Oil

Frank Rusco, (202) 512-3841 or ruscof@gao.gov

In addition to the individual named above, Christine Kehr (Assistant 

Director), Philip Farah, Quindi Franco, Cindy Gilbert, Taylor Kauffman, 

Celia Rosario Mendive, Alison O’Neill, and Barbara Timmerman made 

key contributions to this report.

Appendix IV: GAO Contact and Staff 

Acknowledgments

GAO Contact:

Staff 

Acknowledgments:
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