Another Capitol Hill Gimmick That Would Increase Gasoline Prices
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Recently, Congressman Ed Markey (D-MA), Chairman of the House Select Committee for Energy Independence and Global Warming sent a letter to President Bush suggesting, "[i]t is imperative that action be taken to immediately halt shipments of domestically produced oil overseas to protect American consumers." Ignoring the fact that the U.S. does not export a single barrel of oil "overseas," this isolationist proposal may seem like a quick way to reduce the price of gasoline…no exports means more supply and more supply means lower prices, right? However, like many ideas originating in Congress, this one has an opposite result of its stated purpose.
Chairman Markey incorrectly suggests that the U.S. exports 1.8 million barrels of oil per day. This assertion confuses apples with grapefruits and is yet another example of a policy proposal not based in fact. While the U.S. did export 1.8 million barrels per day of crude oil AND other liquid and petroleum products in May 2008, only 1% of that (19,000 barrels) was actually crude oil (all of which went to Canada, not overseas). The remainder consisted of supplies of dozens of other products like jet fuel and kerosene that exceeded U.S. demand going to over 50 countries. In fact, the U.S. exported almost as much asphalt as it did crude oil.
If we assume Chairman Markey is suggesting we prohibit the exportation of crude oil AND all other products, what would happen? Putting aside potential violations of international trade agreements, we get higher gasoline prices here in the United States. When a barrel of crude oil is processed and refined, it yields many different products, a portion of which is gasoline. A refiner needs a market for all of these other products. If the refiner is not able to sell them in a global market, it is forced to reduce total output to ensure it does not end up with a significant surplus of non-gasoline products in excess of U.S. demand.
At the end of the day, Chairman Markey’s proposal would lead to less refinery output and thus, less gasoline. When supplies of gasoline decline, prices will increase. This is another attempt to make policy by press release instead of by informed analysis of the facts. The American people deserve a more honest approach to crafting the nation’s energy policy.