A Crude Oil Export Ban Would Hurt, Rather Than Help American Energy Consumers

With gasoline prices soaring, the Biden administration is scrambling to find a way to give Americans some relief at the pump—including bringing back a ban on crude oil exports. But banning exports of American energy would do little to lower gasoline prices and could even cause prices to increase in the long run.

Speaking to reporters during a tour of part of the Strategic Petroleum Reserve in Louisiana this week, Energy Sec. Jennifer Granholm said that the administration was “not taking any tools off the table,” to reduce soaring gas prices, including reimposing a crude oil export ban.

Sec. Granholm’s statement marks a shift in policy since December, when she told the energy industry executives that a such a ban was not being considered.

Reinstating the crude oil export ban would be a dramatic sign that, thanks to policies like the federal lands leasing ban, the United States is moving away from the position of energy independence that it held just a few years ago. More than that, it would do little to lower soaring energy prices at home or abroad.

“Not Only Ineffective, But Counterproductive”

In January, the Dallas Federal Reserve released a study on the potential impacts of a crude oil export ban, looking into the impacts such a ban would have on global energy prices and how this would impact American consumers. The study concluded:

“Because a cessation of U.S. crude oil exports would lower the supply of oil in global markets and raise its price, one would expect global fuel prices, if anything, to increase as a result.” (emphasis added)

Higher global energy prices in turn incentivize refiners to sell fuel abroad, rather than for domestic use. As a result, an export ban could actually end up worsening gas prices for consumers.

The study found:

“The prices of gasoline and diesel fuel in the U.S. would not be expected to decline and might actually increase, rendering the crude oil export ban not only ineffective, but also counterproductive. Thus, there is no reason to expect that U.S. consumers would benefit from such a ban.” (emphasis added)

Europe Increasingly Importing More U.S. Crude

Reinstating a crude oil export ban would also be detrimental to European countries that are in the process of decreasing their reliance on Russian oil and gas. As Reuters recently reported:

“U.S. crude exports bound for Europe are close to 1.5 million barrels per day (bpd) so far in April, the highest in two years and one of the strongest months on record, said Matt Smith, lead oil analyst for the Americas at data provider Kpler. Most cargoes are carrying light sweet grades, he added, headed to European destinations including Spain, the United Kingdom, Denmark and Italy.”

The article continued:

“British refineries, which plan to phase out Russian oil imports by the end of the year, last month bought the largest volume of U.S. crude in two-and-a-half years, Eikon data showed. Most cargoes were U.S. light sweet oil, with at least a quarter delivering Midland crude, according to the U.S. Customs data. Spain is set to import a record 7 million barrels of U.S. crude in April, according to cargo tracking data, after a peak in March of nearly 6 million barrels.”

Export Ban Hurts Investment, Future Production

With access to foreign markets, domestic producers have greater incentive to invest in production increases, leading to increased energy production and lower gas prices for American consumers. These increases in domestic production created thousands of high-paying jobs here in the United States and delivered millions of dollars of tax revenues to states and local governments.

A return to a crude oil export ban would put these jobs and tax revenues at risk, while doing little to affect gasoline prices.

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