USA Today reported on New Year’s Day 2020 that “$3 gas is becoming a distant memory” and “the main reason is the nation’s oil boom.” My, how issues have modified in simply 23 months.
U.S. oil manufacturing has fallen by about 1.5 million barrels per day since then, and gasoline prices approaching $4 a gallon have offended motorists remembering all too effectively the sky-high pump prices they thought they’d by no means see once more. That’s very true right here in Illinois, which has the second-highest gasoline taxes within the nation.
In response to the best pump prices since 2011, the Biden administration has not solely begged overseas adversaries to extend oil manufacturing — ignoring the truth that USA Today and different media shops have acknowledged that home producers can treatment the scenario — however has additionally floated the concept reinstating the U.S. crude-oil export ban that was lifted six years in the past.
Such a coverage could really send gasoline prices hovering even higher, which is the very last thing Americans want with power prices and inflation already spiking at an alarming price.
To perceive why a crude export ban would do nothing to decrease pump prices, it’s important to notice that refined petroleum merchandise resembling gasoline are traded on the world market and are decided by international market prices. Global oil demand not too long ago surpassed pre-pandemic ranges of 100 million barrels per day and is anticipated to succeed in all-time document ranges subsequent 12 months. So the straightforward legal guidelines of economics inform us that if crude-oil exports from the United States — world’s prime oil producer — had been banned, international provide would contract on the identical time demand continues to surge because the world recovers from the COVID-19 pandemic.
There isn’t any scarcity of proof from the current previous to assist the latter conclusion. Prior to the U.S. crude export ban being lifted in 2015, the worldwide Brent oil value normal averaged between $98 and $112 per barrel from 2011 to 2014. Why? Even although the United States was rising because the world’s main oil producer due to the shale revolution, U.S. oil was largely unavailable to produce the worldwide market, giving the Organization of Petroleum Exporting Countries energy to control prices, which it promptly did, resulting in excessive gasoline prices.
A crude-oil export ban would additionally lead to a glut of domestically produced oil within the U.S. to go together with an undersupplied international market. That’s as a result of numerous American refineries are usually not ideally outfitted to course of the high-quality grade of crude that U.S. oilfields usually produce. Most American refineries are configured to course of the dense, high-sulfur, low-quality crudes coming from Mexico, Venezuela, Canada and Saudi Arabia.
A glut of oil within the U.S. coupled with an undersupplied international market could be nice information for OPEC and Russia, however horrible information for U.S. producers and customers. Just as they did for many years earlier than the U.S. crude export ban was lifted, OPEC and Russia would possible both pump extra oil to attempt to fill the void created by the lack of American provide or intentionally limit its output in order that prices could be artificially elevated.
Former President Barack Obama famously stated throughout his administration that, “We just can’t drill our way to lower gas prices.” But as USA Today reported, we did simply that a number of years in the past — and we are able to do it once more.
Strong U.S. oil manufacturing saved the typical American family $500 per 12 months from 2014 to 2019 by preserving pump prices beneath $3 per gallon. But as coverage after coverage aimed toward punishing U.S. oil producers and suppress home output has been imposed this 12 months, U.S. oil manufacturing has dropped almost 12 p.c since early 2020 and pump prices have soared by greater than $1.30 per gallon.
If the Biden administration was critical about preserving gasoline prices low, it could do every thing in its energy to facilitate elevated U.S. oil manufacturing to extend international provide and supply aid. Imposing a crude-oil export ban and additional hamstringing our home oil producers will solely be sure that America’s pump ache lingers on.
Seth Whitehead is government director of the Illinois Petroleum Resources Board, which gives public consciousness and teaching programs relating to the upstream Illinois oil and gas trade and works to scrub up and restore deserted oilfield websites all through the state. Its packages are funded completely by voluntary contributions of oil and pure gas producers and royalty house owners in Illinois.