America is in the midst of an unprecedented energy crisis, largely due to policy misfires from the federal government. Rather than change course and allow the American fossil fuels industry to meet consumer demands, President Biden is reportedly considering another harmful action that could exacerbate the problem. According to reports, the Department of Energy may be planning to ban fuel exports, such as gasoline, diesel, and other refined petroleum products – a move that would further disrupt global energy markets and raise prices.
In a huddle with White House pool reporters last month, National Economic Council Director Brian Deese had this to say about a possible ban on gasoline exports: “The president has directed that we have all options on the table, and that will continue to be the case.”
Currently, both America’s refining and pipeline capacities are maxed out, so cutting off markets abroad will lead to an inventory excess of crude oil, and will cause drillers to slash production. Cutting off foreign markets will also further destabilize global energy markets and create inefficiencies in the supply chain by causing shortages in regional markets overseas. As a consequence, this will actually push energy prices higher. This perspective was confirmed by a recent study from the American Council on Capital Formation, which estimated prices would increase by about 15 cents per gallon if an export ban is implemented.
The negative implications of banning petroleum exports were even echoed by a half-dozen Democrat members of Congress. In a recent letter to the White House, they note “we urge you to use discernment in pursuing policies that will address painfully high prices, and avoid policies that may have unintended consequences, such as well-intentioned but misguided calls to curtail crude or petroleum exports.”
This move could clearly have detrimental impacts across the energy supply chain; impacting producers, pipeline operators, refiners, and shippers. Instead, we must greatly increase pipeline and refining capabilities so we can maximize the amount of diesel fuel and gasoline that can be produced. Without increasing both, we will not be able to fully solve the ongoing energy crisis, as crude oil has limited usage until it becomes a refined product. Because of this, it is fair to say that one of the most important factors to lowering gas prices comes from a strong refining sector.
Given the political sensitivities of high gas prices, it is understandable for this administration to want to give the impression that they are working to solve this issue. The first rule in solving a crisis is to “do no more harm.” Yet, with an export ban on refined petroleum products, that is exactly what will happen.