The impact of changes to current US restrictions on crude oil exports on gasoline prices would depend on how those potential changes impact Brent, rather than WTI crude prices, the US Energy Information Administration said in a report Thursday.
"Brent crude oil prices are more important than WTI crude oil prices as a determinant of US gasoline prices in all four regions studied, including the Midwest," the EIA said.
The study points out that WTI lost "much of its power" to explain US gasoline price changes after 2010 when its differential to Brent became wider and more volatile. Brent "lost very little of its power" to explain US gasoline prices during this period.
The report, one of several the EIA is releasing as it studies the impact of a potential change in US crude export policy, does not offer a definitive answer on the impact of export changes to US gasoline or crude prices, nor does it quantify the impact of such changes.
The report, for example, does not forecast changes in US gasoline prices if current restrictions on crude exports were relaxed or dropped. A study released by Brookings, a Washington think tank, last month claimed that US gasoline prices would fall 9-12 cents/gal if export restrictions are dropped. In May, a study from the energy consultancy IHS claimed that free trade of crude would cause US gasoline prices to fall 8-12 cents/gal.
The conventional wisdom within these reports is that loosened US crude export controls would raise the price of US-produced crude, spark an increase in US production, boost global crude supplies and reduce world oil prices. The EIA report does not support or refute this presumption, but said the situation depends on a "host of factors," such as the prices domestic producers receive, sensitivity of future US production to price changes, willingness and ability of US refineries to absorb this new production and the reaction of foreign producers to US crude production.
Several members of Congress, including Senator John Hoeven, a North Dakota Republican, have said they were unwilling to support a loosening of crude export restrictions until they were certain it would not impact US gasoline prices negatively.
While the EIA report did not offer a clear answer on the potential impact, Senator Lisa Murkowski, an Alaska Republican and a leading Capitol Hill supporter of dropping US restrictions on crude exports, saw it as backing the argument that a looser export regime could contribute to lower gasoline prices.
"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," she said in a statement.
Several high-ranking Obama administration officials, including Energy Secretary Ernest Moniz, said the US is considering changes to US export restrictions as domestic crude production climbs amid potential limits in US refining capacity. Congress is also considering legislation to change export rules, but sources claim lawmakers may not take this up until 2016.
