Biden has released oil from the country’s strategic petroleum reserves, but more steps may be needed to bring down gasoline prices.
Saul Loeb/AFP/Getty Images
The Biden administration is “not taking anything off the table” when it comes to lowering gasoline prices, and that could include limiting exports of oil and fuel products from the United States.
Gasoline hit a record price of $4.59 in the U.S. on Wednesday, and some analysts think that prices could go even higher. Biden has announced policies to try to reverse the increase, including by releasing oil from the country’s strategic petroleum reserve. That has slowed price increases because it has contributed to supply.
But Biden may have to do more if he wants to reduce the price of gasoline and slow inflation in other products, like diesel. Energy Secretary Jennifer Granholm told reporters on Tuesday that “I can confirm the president is not taking any tools off the table” in response to a question on whether export restrictions are possible. The White House did not respond to a request for comment about whether the administration is planning export restrictions.
U.S. refiners are sending more gasoline and diesel than usual to other countries as they attempt to replace some of the supply no longer coming from Russia because of sanctions. The surge in exports may have caused prices to rise more in the U.S., because refiners can choose to send their gasoline overseas instead of to U.S. stations. There’s now much less gasoline in storage than there usually is at this time of year, which should keep domestic prices high for an extended period.
Limiting exports would be controversial. The U.S. has only been exporting oil products for six years after President Obama signed a new law to allow it. The country now exports more than eight million barrels of crude and products per day—while it consumes some 20 million barrels domestically—and the practice has helped refiners and domestic producers improve their financial results. It has also allowed the U.S. to help Europe reduce its dependence on Russian oil. Tom Kloza, global head of energy analysis at Oil Price Information Service (OPIS), predicted in a recent interview that U.S. export restrictions wouldn’t target shipments to Europe, given the U.S. policy of isolating Russia, but could target shipments to places like South America.
Some analysts think export restrictions could cause ripple effects in U.S. energy markets.
“If export opportunities were shut off, these barrels would stay at home, likely leading to significantly rising inventories, weaker cracks [a measure of refining margins], and lower capture rates given additional RIN [renewable credits] exposure,” wrote Matthew Blair, an analyst at Tudor, Pickering, Holt & Co. “We note that other countries have recently employed similar measures to deal with rising prices, with Argentina, India, Malaysia, and Indonesia halting exports of soybean oil, wheat, chicken, and palm oil, respectively.”
“Hopefully, this potential action is fairly unlikely given the geopolitical ramifications of pulling diesel off the global market at a time when allies in Europe are scrambling to replace lost Russian diesel exports,” Blair wrote. “If it did happen, we see Gulf Coast refiners most at risk.”
Among the companies with refineries on the Gulf Coast are Marathon Petroleum (MPC) and Exxon Mobil (XOM).
Write to Avi Salzman at [email protected]
