In addition to the Biden administration’s anti-energy policies, OPEC’s decision to cut oil supply has put the Administration in a difficult position right before the midterm elections. After months of decline, consumers are starting to face pain at the pump. In fact Riyadh’s decision has contributed to a 20-cent rise in gas prices in the past month.
As Biden scrambles to keep energy from rising, some have suggested that his administration consider banning crude oil exports. Doing so would be misguided and impose more economic harm on American families by curtailing supply and driving prices at the pump higher.
The notion of a potential crude oil export ban sent shockwaves through U.S. oil groups. In response, American Petroleum Institute and American Fuel and Petrochemical Manufacturers penned a joint letter to Energy Secretary Jennifer Granholm
“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. For these reasons, we urge the Biden administration to take this option off the table,” the groups told the Biden Administration in a letter.
Oil prices are largely driven by global markets and global supply. While proponents of an oil export ban believe that it would lead to lower prices in the U.S., it would have the opposite effect as it would limit global supply and lead to greater energy shortages. As Exxon Mobil CEO Darren Woods explained in his own letter to the Department of Energy.
“Continuing current Gulf Coast exports is essential to efficiently rebalance markets—particularly with diverted Russian supplies,” Woods wrote as reported by the Wall Street Journal, “Reducing global supply by limiting U.S. exports to build region-specific inventory will only aggravate the global supply shortfall.”
Likewise, as energy public policy analyst David Blackmon noted in Forbes, eliminating oil exports would most likely cause oil prices to spike due a substantial drop in supply. Reinstating the crude oil ban that Obama repealed in 2015 would result in hundreds -perhaps thousands- of shale wells shutting down due to not having any refining home.
As Blackmon also points out, the Biden Administration could address oil shortages by repealing the Jones Act, which bans non-American ships staffed by foreign crews from transporting goods from one American port to another.
Undoubtedly, America’s relationship with Saudi Arabia continues to grow more fragile. The Saudi government commits grotesque human rights violations including murdering members of the LGBTQ community, oppressing women, and causing a famine in Yemen. Saudi Crown Prince Mohammed Bin Salman (MBS) arranged the brutal execution and dismemberment of American journalist Jamal Khasoggi.
President Biden’s personal relationship with Saudi Arabia has been rocky, to say the least. He called for an end to the American-Saudi relationship during his 2020 campaign and promised to make Bin Salman a “pariah.” During this summer’s oil price spike, he attempted to smooth over American-Saudi relations by visiting Saudi Arabia and directly meeting with MBS.
Despite this, OPEC’s decision to cut production indicates that Saudi Arabia and its allies are aware of how to leverage their energy influence to their advantage. As the world’s largest oil and gas producer, the United States should do the same by liberalizing energy markets. America needs to chart a path toward energy security that is not as dependent on Saudi Arabia. Banning the export of American oil however is not the best pathway forward and would likely lead to further pain at the pump this winter.
Corey Walker is a budding historian and economist. He loves drinking hot chocolate, wearing sweaters, and watching football in the fall.