(Bloomberg) – President Joe Biden faces increasing pressure, even from fellow Democrats, to deal with rising gasoline prices with measures such as a ban on oil exports, a a move that could upset global markets, discourage shale drilling and end up not helping American drivers as much.
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Just six years ago, Congress lifted a 40-year-old ban on U.S. oil exports, reshaping global crude flows, shifting geopolitical power, and disrupting entire economies. The United States has become the world’s largest oil producer, and its crude has reached more than 50 countries, with shipments often exceeding those of any OPEC country except Saudi Arabia.
Rolling back now would almost certainly make the country’s flagship crude, West Texas Intermediate, cheaper, but it would also hurt shale drillers as they recover from last year’s unprecedented stock market crash. Meanwhile, US Gulf Coast refiners that rely on imported oil could end up paying more for those foreign barrels in a global market deprived of US supplies.
“If you lock in the crude and cause the price of WTI to drop artificially, you are probably hurting the driller more than you are helping the driver,” said Kevin Book, managing director of research firm ClearView Energy Partners. âThe US economy has more to gain from an investment in the petroleum sector than from savings in the service aisle. “
For US allies facing a crisis that has led several UK energy suppliers to bankruptcy and the shutdown of European heavy industry factories, a sudden cut in US crude supplies would be a blow. US exports have consistently exceeded 3 million barrels per day, more than the production of major OPEC members like Kuwait and Iran.
“The impact of the ban would be extremely high,” said Matt Salle, portfolio manager at Tortoise Capital Advisors, a company that manages around $ 8 billion in energy-related assets. “The decline we would get from foreign markets would be extreme.”
It’s unclear whether Biden would go ahead with an export ban, even after Energy Secretary Jennifer Granholm said last month it was possible. But calls for the administration to do so have intensified as gasoline prices at the pump are at their highest since 2014.
“It’s a tool we haven’t used, but it’s also a tool,” Granholm said last month at a forum hosted by the Financial Times.
See also: Biden lacks tools to correct voter-hated pump price hike
This week, eleven Democratic senators, including several known for their concerns about climate change, urged Biden in a letter to act quickly. Senators cited the “excessive burden” on families and small businesses and called for action, including a ban on exports of US crude.
“As the United States strives to spur the development of clean, renewable energy over the long term, we need to make sure Americans have the means to refuel their cars at the pump in the meantime,” the report said. letter, which was signed. by climatic hawks such as Elizabeth Warren of Massachusetts and Ed Markey, author of the Green New Deal.
The Democrats’ call to action comes as Republicans regularly hammer home the Biden administration for rising energy prices, while questioning measures that have included a hiatus on oil and gas drilling and l abandonment of the Keystone XL pipeline project.
Pairing the Democrats’ call to release more oil into the market with an export ban could provide cover for Green Senators who could be criticized by their environmental supporters who are focusing more on the transition to renewables.
A ban on the export of oil, as well as a ban on the export of refined products, are among the solutions the White House has prepared as options, although a release of oil from the Strategic Petroleum Reserve is seen as the next step. more likely, according to someone familiar with the matter.
Things got a little tricky this week after a US Energy Information Administration report released on Tuesday estimated that the oil market will be in surplus and prices will drop early next year, giving less material to the market. administration to justify an intervention.
“The secretary and president continue to monitor markets and prices, including yesterday’s EIA forecast and continue to assess all options for appropriate action at the appropriate time,” Jeremiah Baumann told reporters, Deputy Chief of Staff of the Department of Energy.
Yet the most likely course of action is a release of oil from emergency reserves, said Bob McNally, chairman of consultant Rapidan Energy Group and former White House official.
“The administration, by all accounts, is most seriously looking for an SPR version, which the market expects,” McNally said. “I still think the market expects an SPR release later this week and I think that’s the more likely option.”
This too would not be welcome by shale drillers.
âIf I’m a producer and I’m thinking about bringing back rigs and all of a sudden the US is really going to start seeing the rough coming out of SPR, you’re going to rethink that decision,â Tortoise said. said Salle.
As for an export ban, he simply did not see it.
âIt won’t happen,â Salle said.
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