Export Ban Would Mean Higher Gas Prices for Americans

Gas prices at a Chevron gas station in Ludlow, California July 13.


Photo:

Ralph Lauer/Zuma Press

Gasoline prices have fallen but are still high, and President Biden is reportedly considering an export ban on refined products – gasoline, diesel and jet fuel. The idea is that restricting exports would increase domestic supply and put pressure on prices.

Democratic lawmakers had been pushing for such a ban since last year. In December, Energy Secretary Jennifer Granholm told the National Petroleum Council the government is not considering it: “I heard you loud and clear, and so did the White House.” But when asked about the idea last month, she said of the president: “He’s not proposing that at the moment. But he’s not willing to take tools off the table.”

It should be off the table. As my colleagues and I find in a new study, an export ban on refined products would raise prices at the pump for most Americans.

The problem is that the US does not have enough infrastructure to ship all the refined products from the major Gulf refineries to the east and west coasts. If some inventory of refined products were stranded instead of being exported by ship via Gulf ports, refiners would be forced to cut production. As a result, the east and west coasts would have to continue importing gasoline and diesel from a global market that would have less supply due to the US export ban. All of this would result in higher prices on and near the East and West Coasts, affecting two-thirds of Americans.

That alone should convince the President not to proceed with a ban. But it could also be geopolitically disastrous. The US exports more than six million barrels of refined products a day, about half of which end up in North, Central and South America. If the US banned these exports, where would the rest of America go to replace those three million barrels a day?

The US is the largest exporter of refined products, accounting for 12.1% of world trade; a ban would bring that to zero. Who is #2? Russia with 9.9%. Does it sound like a good idea to abandon trade ties with our allies in America, leaving them few options other than forging a stronger relationship with Russia?

The third largest exporter of refined products in the world is India with 7.7%. America has a good relationship with India, so its greater influence in America wouldn’t be such a bad thing, would it? On the other hand, India has refused despite much of the world imposing sanctions on Russian oil imports in response to Russia’s unjustified invasion of Ukraine earlier this year. Indian imports of Russian crude have risen by more than 700,000 barrels a day since the beginning of last year.

If the US bans the export of refined products, countries in America would likely replace many of those lost barrels with Russian products or Indian products derived from Russian crude oil. In either case, the US would lose geopolitical clout in its own global backyard and likely cede it, at least in part, to Russia.

An export ban would increase costs for the majority of Americans and give Vladimir Putin more influence. There’s no way Mr. Biden thinks that’s a good idea.

Mr. Isakower is senior vice president for energy and regulatory policy at the American Council for Capital Formation.

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Alley Einstein

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