US Refiners Urge Biden Not to Impose Gasoline Export Ban but Instead Focus on Boosting Domestic Energy Production

US Refiners Urge Biden Not to Impose Gasoline Export Ban but Instead Focus on Boosting Domestic Energy Production
General view of oil tanks and the Bayway Refinery of Phillips 66 in Linden, N.J., on March 30, 2020. (Mike Segar/Reuters)
Naveen Athrappully

U.S. refiners requested the Department of Energy to reconsider a potential natural gas export ban. They explained the intricacies of the natural gas-supply chain and the adverse effects on prices and jobs, as well as the geopolitical implications the country could be forced to endure in such a scenario.

“Banning or limiting the export of refined products would likely decrease inventory levels, reduce domestic refining capacity, put upward pressure on consumer fuel prices, and alienate U.S. allies during a time of war,” said the American Petroleum Institute and the American Fuel and Petrochemical Manufacturers in a joint letter (pdf) to Secretary of Energy Jennifer M. Granholm.

The two associations added that the ban will “disrupt global markets” and “harm U.S. national security and geopolitical standing” in the wake of current imbalances affecting global supply chains following the Russian invasion of Ukraine and lingering effects of the COVID-19 pandemic restrictions.

In the Sept. 30 statement, Granholm said that energy companies were bringing in “record profits” while passing on the costs to consumers. The average markup is “about $1.27, compared to a typical 90 cents for this time of year,” which was due to “a failure of companies to maintain sufficient regional inventories” to buffer national demand while exporting gas and diesel at record levels.

She warned the companies to “take action to lower prices for consumers and to rebuild inventories of gasoline and diesel in this country that are below the five-year range.”

The Epoch Times has reached out to Secretary Granholm for comments.

Response From Refineries

The letter stated that the United States exports around 3.5 million barrels per day (MMB/D) of gasoline, diesel, and other refined products, or more than 19 percent of the refining capacity of 18 MMB/D. Restricting this would disrupt global supply, increase costs, and affect U.S. dependability on the global stage while discouraging energy investments within the country.

For example, choking off energy supplies to Latin America, where approximately more than 1 MMB/D is supplied, would effectively turn the region into relying on Russian and Chinese sources.

An export ban could shutter an estimated 1.3 MMBD (7 percent of U.S. total) due to trapped refinery production in the Gulf Coast, leading to stranding a surplus of crude oil in the central United States and halting upstream energy production.

“An export ban could result in higher product prices for U.S. fuel consumers, with more than two-thirds likely to experience price increases of more than 15 cents per gallon for gasoline and 45 cents per gallon for distillates,” said the letter.

Besides this, there would be a net loss to U.S. gross domestic product of more than $44 billion in 2023, and eliminations of 85,000 jobs this year and 35,000 during 2023.

Impact of Restrictions on Local Inventories

In addition, disrupting exports would result in the East Coast—which depends on imports from the global market because of inadequate refining capacity to meet regional demand—paying more for fuel.

Exports include refined products that do not meet U.S. specifications, hence, “eliminating exports may not increase the production of U.S. fuels and could even reduce production.”

Secretary Granholm’s implication that “exports come at the expense of domestic fuel inventories” suggests a misunderstanding of “the way refined products move and are traded globally.”

“Restricting exports from the U.S. Gulf Coast, for instance, will do little to help build inventories on the West Coast because there is not a readily available or economic way to transport Gulf product to the California coast.” Besides, the West Coast region exports only small volumes of fuel.

The letter ended with the organizations calling for the government to focus on “producing, processing, and transporting” the abundant oil and natural gas resources available in the country.

European Winter and American Politics

Europe needs a steady energy flow to sustain the upcoming heating season. The flow from Russia has been arbitrarily reduced by Moscow and the continent is depending on imports of liquefied natural gas (LNG), with the United States being one of the steady suppliers.

The already-reduced flows were dealt a blow with the recent sabotage on the Nord Stream 1 and 2 natural gas pipelines under the Baltic Sea. Besides, American LNG exporters are already operating at or near capacity levels. This has resulted in the continent finding itself in a precarious situation, with European leaders scrambling to secure enough energy to rein in spiking prices and ensure the continuity of businesses.

The controversial idea to restrict gas supplies to Europe has been gaining traction within the Biden administration amid growing concerns of high energy prices and the upcoming midterm elections.

The ever-high fuel prices have proven to be a damper in the Democrats’ bid to retain control of the House and Senate in November.

When Job Biden assumed the presidency, the 12-month percentage change for the country’s Consumer Price Index for energy was at -3.6 percent. In August 2022, it was at 23.8 percent. For gasoline, it was -8.6 percent, which is now 25.6 percent.

Naveen Athrappully is a news reporter covering business and world events at The Epoch Times.
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