So I heard Lisa Murkowski on CSPAN argue to repeal a 1970’s law that restricts the export of oil. She claims that this will not raise gas prices. How can what she says be true?
Even if we don’t restrict the export of refined products including gas (and perhaps we should), how can it be true that lifting the ban on exports of crude oil NOT increase gas prices?
The reason I ask is because I support fracking as a part of domestic energy policy (I understand fracking is not consequence free but I think it is a necessary) but it is much less attractive as a policy position if we are living with the consequences of fracking so that CHINA can get cheaper oil or so that Alaska can pay out bigger dividends to its state residents.
Theoretically, it is the right thing to do. Export restrictions generally speaking are considered to be a bad thing by modern thinking. See, if China is willing to pay more, it means that the producers of the oil and gas make more money and can now spend that money on new goods. Overall, the U.S. and China both become richer as a result of the free trade.
And, the evidence has shown that this is in fact what is happening. Measured as a whole, the United States is as wealthy as it ever was. The problem is not total wealth, it’s wealth distribution : the top few percent receive basically 100% of the gains.
This problem isn’t related to the foreign oil sales ban : whether that fracked oil goes to China or stays stateside, the top few percent will continue making all the gains. No, I don’t know of an efficient and fair way to fix this problem, and some posters here will insist this isn’t even a problem.
I think that it would have to increase gasoline prices unless there is something in the law that allows refineries to be updated or newer refineries built that are more efficient.
However exporting more oil would definitely help the USA balance of trade deficit. That would be a good thing.
Because the US does not produce enough oil to meet its domestic needs. That means even if exports are not allowed, the US needs to import a whack of oil anyway. Restricting exports of oil just means that US oil use is 8 million barrels per day of domestically-produced stuff and 11 million barrels of imported stuff, instead of say 6 million barrels domestic and 13 million barrels imported (with two million domestic barrels exported). And so long as there is any oil imported, the domestic market is connected to the global market, and arbitrage forces it to the global price.
Now if US domestic production was something like 25 million barrels per day (i.e. more than the 19m bbd used), then prohibiting exports would separate the US market from the global market. There would be 25m bbd that would be legally required to remain domestic, in an economy that only “wants” to use 19m at the current price, so the domestic price would have to decrease to increase demand until all of those 25m barrels get used up.
Basically, unless the US starts producing enough domestically to meet demand, export controls are just a feel-good measure that doesn’t lower the price. In fact, export controls can increase it by requiring additional transportation costs: It may be cheaper, transportation-wise, to sell Alaska crude to Japan and use the money to buy additional oil from Alberta to satisfy Pacific Northwest demand, rather than shipping oil from Anchorage to Seattle, but export controls prohibit that economically-sensible route from being taken.
So it will raise gas prices for everyone and increase wealth for the very wealthy…
Well, there isn’t a ban on exporting refined products (so you see refiners on one side of the argument and oil companies on the other side of the argument).
I think we export more petroleum products than we import. We import a bunch of crude but we export even more more distillate and gasoline. If we had a moratorium on the xport of gasoline, then gasoline prices would drop but then countries like Mexico and much of South America would suffer.
I think leachim nailed it.
As long as the USA is a net importer, restricting exports is irrelevant.
The only value would be more efficient transport routes for some oil.
Yes, Alaska crude could be shipped to Japan. Meanwhile, there’s the pipeline (cue protests) proposed from Alberta to Texas. Send alberta crude there.
Another savings would be, if the refineries on the east coast could get shiploads of oil from Arabia or Venezuela instead of by the rail car load from the west (ND).
Since there’s a world market, either eastern refineries pay the world price, meaning western producers get less money since a lot is gobbled up in expensive transport… or the eastern refineries have no choice, they have to buy US crude, so they pay the market rate PLUS shipping and gas costs more in the east than it should.
(This scenario actually happens, sort of, in Canada. Allegedly the Alberta producers are hampered by a lack of export capability; transport costs are so high they make about $30 less than world price on each barrel. That’s why they want pipelines to Texas and to BC ports.)
On the plus side, a producer with crappy profit options will leave more oil in the ground, to extract later when the profit is better. Planning for the future…
