New ACCF Study Finds Petroleum Product Export Ban Would Force Refinery Closures, Resulting in Higher Product Prices and Losses in Employment and GDP
Washington, DC – As the White House and Congress weigh policy levers to provide relief to consumers from rising gas prices, a proposed ban on petroleum exports has become part of the discussion. A new study released today by the American Council for Capital Formation examines the short-to-medium term logistics, pricing, and economic impacts of a complete ban on U.S. petroleum product exports. It concludes that a petroleum product export ban would result in forced U.S. refinery closures which would increase product prices in the global market as buyers of U.S. exports bid up the price of fuel from alternate sources. As a result, U.S. gross domestic product (GDP) would fall more than $44 billion in 2023 and more than 110,000 jobs would be lost by the end of 2023.
“Lawmakers are understandably looking at a number of options to help relieve pain at the pump experienced by U.S. consumers,” said ACCF Senior Vice President of Energy and Regulatory Policy Kyle Isakower. “But a ban on petroleum product exports is the wrong solution and will in fact lead to higher pump prices for most Americans and have severe economic consequences including the elimination of thousands of domestic jobs.”
Key findings in the ACCF Study include:
- A Petroleum Product Export Ban Would Force U.S. Refinery Closures: A ban on U.S. product exports would trap refinery production in the Gulf Coast region as capacity constraints on pipelines and the Jones Act-compliant vessel fleet limit the ability of Gulf Coast refiners to redistribute displaced exports to other U.S. markets. Given limited outlets for trapped exports, an estimated 1.3 million barrels per day of U.S. refining capacity (about 7% of the U.S. total) would need to be shuttered. The refinery closures would also create a surplus of crude oil in the Central U.S.
- The Export Ban Would Result in Higher Product Prices for Most U.S. Fuel Consumers: The loss of U.S. refinery supply would increase product prices in the global market as buyers of U.S. exports bid up the price of fuel from alternate sources. This would increase product prices for consumers in the East and West Coast regions where imports continue to set market prices as the “last barrel” of supply. More than two-thirds of U.S. consumers will see price increases, including average increases of more than 15 cents per gallon for gasoline and more than 45 cents per gallon for distillates over the second half of 2022.
- The Export Ban Would Cause a Net Loss to U.S. GDP:S. gross domestic product (GDP) would fall more than $44 billion in 2023 as losses to U.S. fuel consumers in the East and West Coast regions, refiners in the Gulf Coast, and oil producers in the Central U.S. more than offset benefits to consumers in the Gulf Coast and Midwest regions, refiners in the East and West Coast, and crude oil exporters in the Gulf Coast.
- The Export Ban Would Cause Job Losses: Refinery closures and reductions in upstream oil and gas drilling activity due to the export ban would cause 85,000 average job losses over the second half of 2022 and 35,000 average job losses in 2023, including direct, indirect, and induced job losses.
The ACCF study also notes potential impacts of an export ban on the geopolitical climate as countries in the Americas, who are the primary recipients of U.S. exports, turn to other sources including Russia for alternative supply. Many of these countries are developing nations with low to middle income levels that will be highly sensitive to price increases.
“Economic pain will be felt here domestically but also abroad. The U.S. was the top refined exporter in the world in 2021, followed by Russia and India. Most U.S. exports go to allied countries and trading partners in the Americas,” Isakower said. “Loss of supply from the U.S. will leave many countries with no choice but to turn to Russia and other sources for energy, which would negate the economic pressures applied over the Ukrainian conflict.”
READ THE FULL STUDY:
Economic Impacts of a Potential Ban on U.S. Refined Product Exports