The US Energy Information Administration (EIA) today lent support to producers' case for ending Washington's oil export controls, finding that US gasoline prices are linked to international rather than domestic crude prices.
The EIA, in the latest of a series of planned reports examining the possible effects of easing the export restrictions, found that Brent crude prices were more important than the US benchmark WTI in determining gasoline spot prices from 2000-June 2014 in New York Harbor, the Gulf coast, Chicago and Los Angeles.
"The WTI crude oil price lost much of its power to explain changes in US gasoline prices after 2010, when its differential to Brent crude became wider and more volatile," the report said. Brent, however, lost little of its power to affect US fuel prices.
The study represents a key data point in the ongoing debate over whether export restrictions enacted after the price shocks of the late 1970s should be relaxed amid a rising tide of shale-driven domestic production.
Producers are pushing policy makers to lift the export restrictions for fear a glut of light, sweet crude form US shale formations will depress domestic prices.
The report raised the possibility that lifting the export restrictions could lift domestic oil prices. And if those higher prices were to encourage additional US production that would come onto world markets, global prices could actually move in the opposition direction.
But the study did not address how much lifting the controls would affect domestic output or US and international oil prices, saying that would be the subject of future analyses.
Gasoline price changes are highly correlated across global spot markets, amid changing flow patterns. Demand in Asia, Latin America and the Middle East has risen. Meanwhile US consumption is declining even as domestic output rises, and falling European demand has left a supply of readily available exports for the US. These global patterns have made US Gulf coast and Chicago spot gasoline prices some of the lowest globally during fall and winter months.
The report concurs with numerous industry reports linking US gasoline prices with international rather than domestic prices in recent years.
The study points out a key fact about US energy politics: While crude prices are key to the refining sector, US consumers and politicians are mainly concerned with gasoline prices. Politicians weighing potential support of increased US exports are worried about a potential voter backlash from rising US gasoline prices.
Having the imprimatur of the non-partisan EIA could help producers make their argument with lawmakers on Capitol Hill.
Senate Energy and Natural Resources Committee ranking Republican Lisa Murkowski (Alaska), who has been the most vocal proponent of lifting the oil export controls, hailed the findings.
"If domestic gasoline prices are tied to the Brent worldwide index price, then exporting US oil to our friends and allies will not raise gasoline prices here at home and should, in fact, help drive down prices," Murkowski said.
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