Gasoline prices have been falling, but they’re still high, and President Biden is reportedly considering a ban on exporting refined products—gasoline, diesel and jet fuel. The idea is that restricting exports would increase domestic supply, putting downward pressure on prices.
Democratic lawmakers had been pushing for such a ban since last year. In December, Energy Secretary
told the National Petroleum Council the administration wasn’t considering it: “I’ve heard you loud and clear, and so has the White House.” But when asked about the idea last month, she said of the president: “He’s not proposing that at this 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, a ban on refined-product exports would increase prices at the pump for most Americans.
The problem is that the U.S. doesn’t have enough infrastructure to transport all the refined products from the major Gulf-region refineries to the East and West coasts. If some of the refined-product inventory were stranded rather than exported by ship via Gulf ports, refineries would be forced to cut production. Consequently, the East and West coasts would still need to import gasoline and diesel from a global market that would have less supply because of the U.S. export ban. All this would lead to higher prices on and near the East and West coasts, affecting two-thirds of Americans.
That alone should convince the president not to move forward with a ban. But it also could be geopolitically disastrous. The U.S. exports more than six million barrels a day of refined products, about half of which stays in North, Central and South America. If the U.S. banned these exports, where would the rest of the Americas go to replace that three million barrels a day?
The U.S. is the top exporter of refined products, accounting for 12.1% of world trade; a ban would bring that to zero. Who’s No. 2? Russia, at 9.9%. Does abandoning trade relationships with our allies in the Americas, leaving them with few options other than to create a stronger relationship with Russia, sound like a good idea?
The third-largest exporter of refined products in the world is India, at 7.7%. America has a good relationship with India, so its greater influence in the Americas wouldn’t be so bad, would it? On the other hand, although much of the world imposed sanctions on Russian oil imports in response to Russia’s unjustified invasion of Ukraine early this year, India has refused to do so. Indian imports of Russian crude oil have increased by more than 700,000 barrels a day since early last year.
If the U.S. bans refined-product exports, countries in the Americas likely would replace many of those lost barrels with Russian products or Indian products derived from Russian crude. Either way, the U.S. would lose geopolitical influence in its own global backyard and likely cede it, at least in part, to Russia.
An export ban would raise costs at the pump for a majority of Americans and give
more influence. Mr. Biden can’t possibly think this is a good idea.
Mr. Isakower is senior vice president of energy and regulatory policy for the American Council for Capital Formation.
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