My latest IER post. An excerpt:
To see why the logic behind the crude oil export ban makes little sense, change commodities. For example, should the U.S. government make it illegal for American farmers to ship wheat out of the country? After all, don’t we want to make bread as affordable as possible for American households? Or what about banning the export of pharmaceuticals? Don’t we want to keep drug prices as low as possible in the United States? How about jet airplanes or heavy equipment—should American producers of these items be prohibited from selling them in foreign markets?
Also, in case you think I’m just making a generic free-trade argument, you should click the link to see that ironically, the ban on U.S. exports arguably makes gasoline more expensive for U.S. motorists. Here’s a taste of the logic:
First, realize that if there are no restrictions on the import or export of gasoline, then the U.S. price of gasoline is the same as the world price…At the same time, the ban on U.S. crude exports (if it has any effect at all) means that the U.S. crude price is lower than the world price. U.S. producers of crude would like to be able to sell abroad at the higher world price, but this is illegal, so they must be content to sell within the United States at the lower U.S. price.
Now, the U.S. government suddenly lifts the ban on crude exports: what happens? The immediate response is that U.S. oil producers begin shipping crude abroad, to fetch the higher world price. In the new equilibrium, the price that American refiners must pay for crude has risen, because now they are effectively competing with crude buyers all over the world.
In the new equilibrium, with more total crude oil being produced on Earth each day, it stands to reason that refiners across the globe will end up producing more total gallons of gasoline each day. Since the U.S. government’s policy shift wouldn’t have directly affected any motorist’s demand for gasoline, the increased quantity brought to market can only be sold at a lower price per gallon at the pump. The free-flow of gasoline across borders ensures that the price of gas in the U.S. is always the world price, meaning that a lower world price for gasoline translates into lower prices at the pump for Americans, too.
I include estimates from different sources about what the actual reduction on U.S. pump prices could be, if the U.S. government allowed the export of U.S. crude oil.