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For the first time in three years the U.S. economy has contracted. The Commerce Department had been looking for meager growth in Q1 of 0.1%. But this morning’s revision shows Q1 GDP of negative 1%.
One wouldn’t expect the major indices to be up slightly on such a day. But the market has already adjusted to the idea that the contraction is due to weather. And that the economy is going to bounce back to relatively healthy growth near 3% in the second half of the year.
There’s also a growing consensus that the U.S. has an ace in its back pocket that could drive the economy to grow faster. And that’s oil exports.
Research firm IHS (NYSE:IHS) estimates that the U.S. could create nearly 1 million new jobs by exporting crude oil. Those jobs would unfold over the coming 14 years and increase household disposable income by $391.
It’s no secret that U.S. oil production is on the rise – so much so that North America could reach energy independence before 2020. Exporting would add additional production growth since we can only sell so much domestically.
IHS estimates that an export scenario would boost production from the current level of 8.2 million barrels per day (BPD) to 11.2 million BPD – an increase of 37%.
It’s also likely that gas prices would decrease in this scenario, by around 8 cents per gallon. That means an extra $265 billion stays in the pockets of U.S. drivers over the next 14 years.
Exporting crude would require that the U.S. government reverse its ban on crude oil exports. The ban has been in place since the 1970s, but clearly a lot has changed since then. And the benefits seem significant. The combined impact of more jobs, more disposable income, greater oil production and lower gas prices would almost surely result in GDP expansion.
The U.S. recovery has been helped along in no small part because of its energy boom. And the big picture certainly shows that the U.S. has enough oil to export. Domestic oil production is giving the U.S. a competitive advantage that it has lacked for decades. And exporting the excess is likely to entrench that advantage, while helping the economy stabilize.
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