Democrats in Congress reportedly have urged President Joe Biden to combat high gas prices by not releasing barrels from the nation’s Strategic Petroleum Reserve.
Reportedly, the delegation of lawmakers also wants the president to ban oil exports altogether.
“We must use all tools at our disposal to bring down gasoline prices in the short term,” the Democrats wrote in a letter to Biden.
Reps. Ro Khanna (D-Calif.), Barbara Lee (D-Calif.), Katie Porter (D-Calif.) and Darren Soto (D-Fla.) signed the letter.
Several Senate Democrats also sent a letter to the president.
Oil prices currently stand at about $74 per barrel, a decline of about 10%. Still, with a national average of more than $3.41 per gallon (and a whopping $4.61 in California), many Americans remained skeptical that prices would continue to drop.
Mark Green, a writer for the American Petroleum Institute (API), noted in a recent column that discussions have centered around “the demand-supply mismatch and factors affecting U.S. production, both contributing to higher costs, and the need to support American oil and natural gas.”
“Some think a solution to higher gasoline prices is halting U.S. crude oil exports,” Green wrote.
He said numerous experts have weighed in on that, with IHS Markit cautioning a new crude export ban could make things worse.
API Chief Economist Dean Foreman identified one primary issue.
He told Green that the U.S. energy revolution enabled a resurgence in domestic production, adding 4.5 million barrels per day of crude oil and 1.5 million barrels per day of natural gas liquids between 2008 and 2015. These new supplies helped to meet domestic demand growth and reduce U.S. crude oil imports by 2.5 million barrels per day over the period.
“Despite this historic progress, the U.S. must still import crude oil for two main reasons,” Foreman noted.
“First, domestic refiners have continued to require heavy grades of crude oil that must be imported. And second, the East and West coasts of the U.S. lack pipeline infrastructure to supply all of their crude oil needs and are most economically supplied by crude oil imports from global markets. Global trade and the specialization in the production of different crude oil grades have served U.S. petroleum markets well.”
After the repeal of the crude oil export ban, the export market increased from 465,000 barrels per day in 10 countries in 2015 to almost 3 million barrels per day to 43 countries in 2019, stated Kevin O’Scannlain, API’s vice president of Upstream Policy.
According to the U.S. Energy Information Administration, domestic production increased by more than 3 million barrels per day — from approximately 9.3 million barrels per day before the ban repeal to about 12.8 million barrels per day at the end of 2019.
When asked what kind of oil (light vs. heavy) is the U.S. primarily exporting, and why is that significant to the U.S. refining sector,” O’Scannlain said many U.S. refineries process a heavier type of crude oil.
Before the repeal of the export ban, it led to an oversupply of domestically produced light, sweet crude oil – due to expanded shale production from horizontal drilling and hydraulic fracturing.
“Disrupting international oil trade with a U.S. export ban would force buyers to find other oil, which historically has put upward pressure on global crude oil prices,” O’Scannlain told Green.
What is the importance of U.S. crude exports to America’s allies, America’s trade posture, and American security?
O’Scannlain also explained the importance of U.S. crude exports to America’s allies, the United States’ trade posture, and American security.
“Exports to America’s allies enhance our relationships because they strengthen our allies and increase goodwill toward the U.S. American foreign policy is further enhanced by reducing the power that foreign suppliers have over our allies,” O’Scannlian explained.
“Exports also reduce U.S. trade deficits and benefit the U.S. economy through job creation, economic growth, and government revenue. U.S. energy producers should not be placed at a competitive disadvantage to anyone, whether it is Russia, Iran, or any oil-producing country.”
“Further, the flexibility to export product in times of market imbalance helps the industry operate efficiently and maintain production levels. This greatly enhances U.S. energy security by allowing the U.S. to sustain more reliable production levels.”
When asked what halting U.S. crude exports would mean for the global market and whether there are potential longer-term impacts, Foreman noted that sudden removal of roughly 3 million barrels per day of U.S. crude oil supplies would be an enormous shock that could be difficult for global oil markets to accommodate.
“And if that removal of U.S. crude oil supply substantially raised international oil prices, it would likely compound global economic stresses that have not yet resolved following the 2020 COVID-19 recession,” Foreman asserted.