An analysis using contemporary theories of international trade.

1. Taylor Benson
Averie Coppola
Michael-Paul Cokinos

2.  Environmental Policy and Conservation Act
(EPCA)
 Enacted in 1975 under President Ford
 Reaction to global volatility
 Prohibited exports, some allowed with
licensure

3.  Production was thought to have peaked in
1970
 Production all time low in 2005
◦ 1970 to 2005 9.6 to 5 MMbbl/d
 Technological advances increased efficiency
 Production more than doubled by 2013

4.  Spending bill for 2016 removed export
restriction
 Passed through House and Senate
 Signed into law December 2015

5.  How will trade flow be determined?
 What are effects on employment?
 What is the effect on real wage?

6.  Technologies improved horizontal drilling
and hydraulic fracture
 Gulf wells produce heavy crude

7.  API – inverse scale of density
 Sulfur - percentage
 Sour, heavy crude oil
◦ High intense refining for product slate
 Sweet, light crude oil
◦ Less intense refining for product slate
◦ Domestic shale and tight oil, from fracking

8. Heavy crude has an API gravity <= 27
Light crude has an API gravity >= 35
Medium crude has an API gravity between 27 and 35
Sweet crude has 0.5 sulfur content or less
Sour crude has more than 0.5 sulfur content.

9.  US has not reached 100% Capacity
 East coast specializes in light crude
 Gulf coast specializes in heavy crude
 Infrastructure fragments refiners
◦ Pipelines
◦ Rail
◦ Water

10.  Canada
◦ Produces heavy crude
◦ Refines light crude
 US
◦ Produces heavy (gulf) and light crudes
◦ Refines heavy and light crudes

11. BP Statistical Review of
World Energy 2016
© BP p.l.c. 2016
Major oil trade movements 2015
Trade flows worldwide (million tonnes)

15. 7 most prolific oil and gas wells, lower 48

19. By Petroleum Administration Defense District
(PADD)
thousand Barrels

20. thousand Barrels

21. By Petroleum Administration Defense District
(PADD)
thousand Barrels

22. thousand Barrels

23. Ricardo:
 Opportunity cost, comparative advantage
Heckshire-Ohlin:
 Trade occurs because of different resources
 6 assumptions

27.  Oil industry has widespread economic impact
for the U.S.
 These impacts result directly from
employment and production
 They also result indirectly through the
industry’s purchases of capital goods,
personal purchases of employees, and
business owners.

28.  Direct impact is measured by jobs, labor
income, and value added within the industry
 Indirect impact is measured by jobs, labor
income, and value added occurring
throughout the supply chain of the industry
 Induced Impact is measured by jobs, labor
income, and value added resulting from
household spending of labor

29.  In 2011, the oil industry directly provided 2.6
million jobs for American workers
 Paid $204 Billion in wages, salaries, and
fringe benefits
 Generated $551 billion in GDP
 Chart on next slide

31.  This includes the operational and capital
investment impacts
 About 9.8 million full time and part time jobs
provided
 This accounted for 5.6% of total U.S.
employment
 Chart shown on next slide

37. Oil and Gas Extraction Subsector
Adjusted Price, Crude Barrel
2012 2013 2014 2015
$62.64 $63.62 $62.53 $62.49
90.72 94.25 97.05 92.53
Petroleum Engineer avg. hourly wage
Real Wage : Wc/Pc
.69 .68 .64 .68

38.  Macroeconomic effects of
allowing exports would
be positive
 Increasing GDP and
employment
 Exports would increase
crude oil prices in the
U.S.
 Domestic gas prices
would fall
 Crude oil exports would
also increase U.S. oil
production & improve
U.S. energy security.
Domestic supply after
export

39.  Unrestricted crude exports would increase
U.S. GDP, employment, household welfare,
and balance of trade.

40.  Improves efficiency of the global refinery
operations
 Lowers the margin between prices for final
petroleum products & crude oil input
 Increasing both world supply of petroleum
products & world demand for crude oil
 Resulting in the U.S. having lower gas prices,
but higher gas production, crude oil
production, and crude prices

41. 1) Oil is consumed at world
2) Increasing the supply
3) Decreasing the cost

42.  Overall removing the crude oil ban helps the
U.S. as a whole
 U.S. would gain more employment, higher
GDP, lower gas prices, and higher domestic
crude oil production
 Production growth also leads to increased
energy security

43.  Refineries would lose out
 U.S. based refineries benefit from the ban
since they can buy crude oil at a discount
relative to world prices
 Then they sell refined products at world
prices
 Eliminating the crude oil export ban
eliminates these economic rents

44.  Increase in Energy security increasing jobs for
domestic economies.
 Must modernize America’s energy
infrastructure and facilitate the efficient flow
of resources from producer to refiner to
customer
 New jobs produced at home in all aspects of
energy market.

45. Labor –
Oil 
 Labor
- Other
1) Labor within oil industry
increases from A to B
2) Labor within other
industries decrease from B
to A
3) Wage increases for
people working in oil
industry from W to W’ due
to domestic price increase

46. Trade Deficit
• Recent shale boom has quickly cut
demand for foreign crude
• Petroleum imports fell to $23
billion
• Recent purchase of 189 million
barrels of feign crude oil is the
fewest since 1994
• US was the world’s largest
petroleum and natural gas
hydrocarbon producer in 2015
• “U.S. refineries are mostly
designed to process heavy (rather
than light) crudes. Essentially, all
current and projected increases in
U.S. crude production have been
in light sweet crude, meaning that
the U.S. has much to gain by
exporting this light crude as
exporting light sweet crudes and
importing heavier crudes better
aligns existing refinery
configurations with crude type.”

47.  Access to customers abroad
could drive significate new
investment in US
production
 Nations that act quickly to
attract FDI will reap
economic rewards with USA
in global race to secure
competitive position in the
international market
 Gain allies, expand our
geopolitical influence, and
strengthen our global
energy market against
foreign disruptions.

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