Alaskan North Slope Oil:

Limited Effects of Lifting Export Ban on Oil and Shipping Industries and Consumers

RCED-99-191: Published: Jul 1, 1999. Publicly Released: Jul 1, 1999.

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Pursuant to a legislative requirement, GAO reviewed Alaska and California energy production, focusing on the effects of lifting the export ban on: (1) Alaskan North Slope and California crude oil prices and production; and (2) refiners, consumers, and the oil shipping industry on the West Coast.

GAO noted that: (1) lifting the export ban raised the relative prices of Alaskan North Slope and comparable California oils between $.98 and $1.30 higher per barrel than they would have been had the ban not been lifted; (2) these price increases have not had an observable effect on Alaskan North Slope and California crude oil production; (3) nevertheless, future oil production should be higher than it would have been because higher crude oil prices have given producers an incentive to produce more oil; (4) according to projections by the Alaska Department of Revenue and to oil industry officials, new oil fields developed in Alaska since the ban was lifted are expected to increase Alaskan North Slope oil production by an average of 115,000 barrels per day for the next two decades; (5) however, it was not possible for GAO to separate the effects of lifting the ban on expected production from the effects of broader oil market changes occurring at the same time; (6) relatively high world oil prices in 1996 and 1997 encouraged oil producers to expand exploration and development activities, while low prices in 1998 caused producers to close wells and reduce development activities; (7) moreover, this expected production increase will not reverse the decade-long decline of Alaska and California oil production, which is expected to continue as aging oil fields become depleted; (8) lifting the export ban increased some refiners' costs but had limited effects on consumers and the oil-shipping industry on the West Coast; (9) while higher prices for Alaskan North Slope and comparable California oil increased the costs of some individual refiners using that oil, it was not possible to determine the extent of cost increases for those refiners or the West Coast market in general; (10) despite higher crude oil prices for some refiners, no observed increases occurred in the prices of three important petroleum products used by consumers on the West Coast--gasoline, diesel, and jet fuel; (11) lifting the ban has also had a minimal effect to date on most oil tanker operators that transport Alaskan North Slope oil, the U.S. shipbuilding industry, and the West Coast ship repair industry; and (12) however, shipbuilding and ship repair industry officials on the West Coast are concerned that Alaskan North Slope oil tanker business may shift in the future to low-cost foreign shipyards.

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