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Economists question Bush’s prescription for lower gas prices

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DES MOINES, Iowa >> The link between ending a 40-year oil export ban and lower prices at the gas pump is not as direct as Republican presidential candidate Jeb Bush would have voters believe in his new energy proposal, industry economists said Tuesday.

Still, Bush’s overall premise that lifting the ban would expand economic growth holds up to independent scrutiny. Environmentalists say the negative impact on the planet would be too great.

Eliminating the export ban, enacted in the 1970s, is the key piece of Bush’s proposal, first published in a paper online Tuesday and later discussed by the candidate.

"We should sell that to the world for national security purposes, for lower prices for us and for greater high-wage jobs in this country," Bush told more than 200 supporters and employees of Rice Energy, a small independent company outside Pittsburgh.

Bush cited studies suggesting a drop of 6 cents per gallon over time, while independent economic forecasting firms suggested a decline of 8 cents.

However, oil is a global commodity and U.S. production has little to do with overall pricing. Presidents have even less power over prices.

"They all begin with the flaw that you can relate the price of oil on the high seas to what Mr. and Mrs. Smith pay at the pump," said Tom Kloza of the independent Oil Price Information Service.

What is clearer is that oil companies would benefit immediately, said Michael Noel, an oil economist for Texas Tech University.

"If the ban was lifted today, tomorrow they could start shipping the stuff," Noel said. "A change in the price in the U.S. is more difficult to gauge."

That’s because the crude oil pumping from U.S. wells at a faster rate over the last decade has been a lighter-weight oil, while U.S. refineries are built for heavier oil, such as what is imported from the Middle East and elsewhere. Lighter oil produced in the United States more often must be refined overseas, Noel said.

Democratic and environmental groups complained Tuesday that Bush was bowing to pressure from the oil industry, though he made his announcement at a family-owned natural gas startup less than a decade old. Critics also say the plan is a boon to the petroleum industry, would provide little benefit to consumers and would prolong U.S. reliance on fossil fuels linked to global warming.

"This plan promises voters the world, but the truth is that the world is exactly what it would sacrifice to fatten the wallets of dirty energy conglomerates," Sierra Club political director Khalid Pitts said in a statement.

In his pitch, Bush cited studies suggesting a likely increase in energy-related manufacturing and higher salaries related to the jobs created. The independent economic forecasting group IHS reached a similar conclusion.

"Ending the crude oil export ban would benefit the entire economy," IHS’s Jeff Marn said. The group estimated that the move would generate 394,000 jobs annually and $86 billion more per year in the nation’s gross domestic product, on average, from 2016 to 2030. The increased economic activity would add $1.3 trillion to cumulative government revenues during that period, Marn said.

Bush’s position is a popular one within Republican circles. Last week, the GOP-controlled House Energy Committee approved a bill that would lift the ban. That move sets up a likely vote in the full House on a measure that President Barack Obama opposes.

Republican presidential candidate Carly Fiorina proposed the same move during a campaign stop in Oklahoma City, also an oil producing center. The former tech company CEO said she would help make the U.S. "the global energy powerhouse of the 21st century."

Speaking to a group of independent oil and natural gas producers, Fiorina said that by not lifting the ban, "we are shooting ourselves in the head and foot and it is not because of science. It is because of ideology."

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