Would fuel be cheaper in America if less of it were exported?

April 5, 2013
April 5, 2013
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US Oil Exports
America now exports more than 3 million barrels of refined products every day.(Getty Images/Justin Sullivan)

The U.S. fossil fuel renaissance has sparked job booms in the oil fields of North Dakota and Texas, shrunk the national import tab, and led to a whole lot of talk about energy independence. But, as Bloomberg Businessweek noted recently, one thing it hasn’t done is lower the price of gasoline for American motorists, who are still paying $3.71 a gallon.

Why not? There are a lot of ways to answer that question, the simplest being that despite all our drilling, oil remains expensive. Worldwide, demand still beats supply. And since the cost of crude accounts for 72 percent of the cost of gasoline,* pump prices have stayed high.

But that doesn’t quite put the issue to bed. After all, Americans are driving and fueling up less, which should theoretically encourage the oil refiners that produce our gasoline and diesel to cut their prices. Businessweek points to a few reasons why that hasn’t happened, but I want to focus on just one of them: exports.

As the magazine’s graph below shows, U.S. exports of refined oil products have surged over the past couple of years, at the same time as the price of gas rebounded hard from its recession-time drop.

Businessweek_Fuel_Exports.JPG

Coincidence? Some say not. Refiners, the argument goes, are choosing to make products that they can sell for a premium on the global market rather than more cheaply at home. And there’s certainly truth to that. When something scarce is sold to the highest bidder anywhere worldwide, prices inevitably go up (See: Oil). But does that mean it’s time to clamp down on exports? Not necessarily.

First, it’s not clear how big an impact they make, partly because we [Americans] don’t export a huge portion of our fuel supply. Of the 3 million or so barrels a day of refined products U.S. refiners ship abroad, only about half are either distillate fuels (which include diesel) or gasoline. American drivers and truckers, meanwhile, use roughly 12 million barrels of fuel each day. Meanwhile, there’s no guarantee that if we suddenly clamped down on exports, refiners would choose to dump their extra supply on the domestic market. Instead, they could choose to reduce production, or as the industry argues whenever someone suggests cutting them off form the world market, simply shut down the refineries that stop being profitable. That might sound like fear mongering, but companies have done it in the past.

And finally, fuel exports offer certain perks. Namely, they’re exports. Fuel and other petroleum products combine to make our largest export category by dollar value, bigger than cars, machinery, or jets. That, in turn, helps out our growth, and creates jobs in places like the Gulf region.

So in short, yes exports are probably costing drivers a bit more. But it’s not clear that ending them would be worth losing their benefits.

*If you’re really interested in the breakdown of what goes into gas prices, the California Energy Commission offers a handy year-to-year cart. 

This originally appeared on The Atlantic. Also on our sister site:

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