According to the Texas Independent Producers & Royalty Owners Association (TIPRO), efforts to ban the export of crude oil or refined products from the United States could be counterproductive and hurt domestic consumers and US geopolitical influence.
“More restrictive and often politically motivated domestic energy policies are clearly not the answer. It is time to take responsibility for the negative impact this approach has had on consumers and work with all stakeholders to address the global energy crisis. This means developing a stable regulatory environment for energy investments in the United States. Deterring investment in domestic oil and gas production and playing with blame and shame only undermines our own energy security and economy,” said Union President Ed Longanecker.
Geopolitical factors and a sudden increase in demand have made 2022 a challenging year for consumers, not just in Texas but around the world, paying above-average energy prices. While there was a bipartisan consensus, including in the White House, that the United States must continue to export natural gas to our allies, disagreements persist over US exports of oil and refined products.
Bloomberg writes that “dwindling fuel inventories and rising pump prices ahead of the November election have prompted the White House to crack down on fuel exports in the hope that bolstering supplies will bring relief to consumers.” However, according to energy experts and economists, this could backfire. Gulf Coast refineries could cut production, leading to higher prices in some parts of the country and making some regions even less fuel available than before.”
Longanecker added that such a ban could also hurt US allies, which have been buying around 1.5 million barrels a day of US oil, most of which came from West Texas, with Reuters saying that British refiners are both the largest Volumes of US crude have increased in the last month alone in two and a half years.
Responding to the White House plans, Longanecker added that limiting exports would limit the supply of crude oil on the world market and also damage the east and west coasts of the United States, which depend on fuel imports.
The US does not have enough infrastructure — pipelines and Jones Act-compliant ships — to ship all of the refined product from the Gulf region’s refineries to the East and West Coasts, making it vital for those regions to get oil, gasoline and diesel to be able to import from these regions the world market. As a result, the regions are subject to global commodity prices. If there were an export ban, they would expect even higher prices.
By not feeding gasoline stocks into the world market, other big producers like OPEC+ will have a bigger impact on the market, making the United States a victim of their decisions not to pump more oil to fill the gap.
Additionally, a crude oil export ban would reduce US GDP by more than $44 billion in 2023 and raise prices for more than two-thirds of US consumers, complicating the current inflationary challenges facing consumers worldwide. would effectively exacerbate, according to a recent American Council for Capital Formation (ACCF) study.
Exports are essential for refineries
US refineries are designed to refine heavy crude oil, which is typically imported. The US refining sector is among the most advanced in the world, capable of refining heavy oil from Central America and Canada and converting it into high quality gasoline, diesel, petrochemicals and feedstocks. This refined oil is then used to manufacture niche products or as fuel for cars, planes and ships. Some of this refined fuel stays in the United States and some is re-exported around the world to key allies in Europe, Latin America and even Asia. In contrast, the United States typically produces lighter crude oil, which few American refineries are equipped to refine and for which there is a smaller market and a lack of infrastructure.
If a ban were in place, oil produced in the Permian Basin would be trapped in Texas, could not be refined and used in the United States, and would create less incentive for US producers to continue drilling. A ban would disrupt global oil supply chains, jeopardize US trade commitments, and lead to an inefficient and costly redistribution of domestic crude oil production.
Currently, US refiners are working at capacity to refine as much product as possible, even increasing production to keep up with a spike in demand. The war in Ukraine and the loss of a million barrels of refining capacity during the pandemic have exacerbated the problems.
The ACCF study estimates that an export ban could shut down 1.3 million barrels per day of US refining capacity. This would result in the closure of refineries and job losses in the US.
Exports provide energy and national security
The ability to import cheap crude oil and export high-quality refined products has been a major contributor to America’s energy dominance. American energy exports not only stabilize global energy markets, but also help reverse the damage done by authoritarian governments that weaponize energy exports.
Longanecker goes on to add that an export ban would hurt US-European allies, who are already paying a heavy price for supplies due to the fallout from the war in Ukraine
The UK warns of a national crisis over rising fuel costs and France is bringing heating oil plants online to meet its domestic energy needs. A ban would hurt the economies of our most trusted allies. As the Wall Street Journal editorial board noted, “If these stop now, Europeans could face a cold and dark winter.”
Export restrictions would also lead to a loss of geopolitical influence in important neighboring regions such as Latin America. Countries in South America rely heavily on refined crude oil imports from the United States, and if exports were halted, those countries would turn to Russia for supplies, resulting in a loss of American strength and influence in neighboring countries.
In short, an export ban would effectively penalize Latin American and European countries for buying US products. Texas is a major global player when it comes to crude oil and the many products that are refined within our borders, and a ban on the global export of these resources would be detrimental both here at home and abroad.
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