The United States has benefited more than any other country in the history of the world from international trade and a global economic system characterized by the free flow of goods and capital. It is even pinning its hopes on a recovery from the current economic crisis on selling more of its stuff to foreign consumers through President Obama’s mission to double exports between 2010 and 2015. The motivation behind this goal is clear: by selling more of America’s goods in foreign markets, the US will create jobs and begin to tackle its large trade deficit. Having been an advocate and a beneficiary of open trade, some U.S. constituencies are arguing that we should restrict or limit exports of energy products on the grounds that the latter will damage U.S. economic and security interests. On both counts, these claims are wrong.

Efforts by the U.S. government to intervene in the energy markets are likely to result in subsidies to consumers at the expense of producers, leading to the inefficient allocation of resources and unintended consequences; just look at the Jones Act to see how protectionism in the energy sector can create impediments to matching supply and demand while raises prices to consumers. Internationally, the imposition of export restrictions work in the same way as, say, Chinese export restrictions on rare-earth materials or Indian export restrictions on cotton (both of which the U.S. has volubly protested): they distort the market and prevent inputs from getting to where they can be most productive.

“Ah”, say the opponents of the economic arguments, “but energy is different – it is a strategic commodity, vital to our national interest”. This line of reasoning is even less tenable. The United States imports around 45 percent of the oil and petroleum products it consumes; for crude oil, the figure is over 60 percent. Despite the fact that it is producing more oil than at any time in the past eight years, the United States is still paying near-record prices for the stuff. This is because the market for oil is global and the United States is a price taker. As the revolution in Libya showed last year, even the loss of a fraction of global supplies can have a large impact on the prices customers pay to fill up their tanks. In the wake of its latest round of sanctions on Iran, the U.S. has asked Saudi Arabia to pump more oil to make up for lost Iranian crude. For the U.S. to implore other energy-producing nations to export more so that it can use that energy as an input to make goods and services to sell back to the rest of the world while simultaneously limiting exports of its own energy is not only bad economics, it is rank hypocrisy. Natural gas is different than oil: thanks to the shale boom and the infrastructure-dependent nature of gas, the U.S. has a considerable price advantage over customers in the Asian and Pacific basins. But that price advantage can be seen as an arbitrage opportunity. If companies want to take the risk on building multi-billion dollar facilities to export gas in liquid form, why should they be hamstrung by government interventions at the expense of manufacturers that want to use the gas as an industrial input?

The second biggest beneficiary of global free trade was arguably the British Empire. As Imperial Britain began its decline, it was often observed that it had gone from “ruling the waves” to “waiving the rules” as it desperately tried to put conditions on the free global trading system that had underpinned its initial success. The United States should learn from history and live by the principles it espouses.

The United States has benefited more than any other country in the history of the world from international trade and a global economic system characterized by the free flow of goods and capital. It is even pinning its hopes on a recovery from the current economic crisis on selling more of its stuff to foreign consumers through President Obama’s mission to double exports between 2010 and 2015. The motivation behind this goal is clear: by selling more of America’s goods in foreign markets, the US will create jobs and begin to tackle its large trade deficit. Having been an advocate and a beneficiary of open trade, some U.S. constituencies are arguing that we should restrict or limit exports of energy products on the grounds that the latter will damage U.S. economic and security interests. On both counts, these claims are wrong.

Efforts by the U.S. government to intervene in the energy markets are likely to result in subsidies to consumers at the expense of producers, leading to the inefficient allocation of resources and unintended consequences; just look at the Jones Act to see how protectionism in the energy sector can create impediments to matching supply and demand while raises prices to consumers. Internationally, the imposition of export restrictions work in the same way as, say, Chinese export restrictions on rare-earth materials or Indian export restrictions on cotton (both of which the U.S. has volubly protested): they distort the market and prevent inputs from getting to where they can be most productive.

“Ah”, say the opponents of the economic arguments, “but energy is different – it is a strategic commodity, vital to our national interest”. This line of reasoning is even less tenable. The United States imports around 45 percent of the oil and petroleum products it consumes; for crude oil, the figure is over 60 percent. Despite the fact that it is producing more oil than at any time in the past eight years, the United States is still paying near-record prices for the stuff. This is because the market for oil is global and the United States is a price taker. As the revolution in Libya showed last year, even the loss of a fraction of global supplies can have a large impact on the prices customers pay to fill up their tanks. In the wake of its latest round of sanctions on Iran, the U.S. has asked Saudi Arabia to pump more oil to make up for lost Iranian crude. For the U.S. to implore other energy-producing nations to export more so that it can use that energy as an input to make goods and services to sell back to the rest of the world while simultaneously limiting exports of its own energy is not only bad economics, it is rank hypocrisy. Natural gas is different than oil: thanks to the shale boom and the infrastructure-dependent nature of gas, the U.S. has a considerable price advantage over customers in the Asian and Pacific basins. But that price advantage can be seen as an arbitrage opportunity. If companies want to take the risk on building multi-billion dollar facilities to export gas in liquid form, why should they be hamstrung by government interventions at the expense of manufacturers that want to use the gas as an industrial input?

The second biggest beneficiary of global free trade was arguably the British Empire. As Imperial Britain began its decline, it was often observed that it had gone from “ruling the waves” to “waiving the rules” as it desperately tried to put conditions on the free global trading system that had underpinned its initial success. The United States should learn from history and live by the principals it espouses.

When it comes to exports, there’s simply no reason to single out energy for special treatment.

Our elected officials applaud other industries that make goods and services here and sell them abroad, because those exports support millions of jobs and inject hundreds of billions of dollars into the U.S. economy. In fact, as President Obama has noted, we need even more exports to put jobless and underemployed Americans back to work and get the economy back on track, because “[n]inety-five percent of the world’s customers and the world’s fastest-growing markets are outside our borders.” Obama has set a goal of doubling U.S. exports, and reaching it will require the active involvement of all America’s industries, including the energy sector.

The good news is a surge in American energy production, especially natural gas from shale-rock formations, means we can keep energy affordable at home and boost our energy exports to bring billions of dollars of new trade revenue into the country and create thousands of new jobs. The growing international market for liquefied natural gas, as nations in Europe and Asia look for reliable alternatives to coal and nuclear power plants, is particularly promising. That’s a big reason behind the federal government’s recent decision to approve the construction of the $10 billion Sabine Pass LNG export terminal in Louisiana.

The two-step federal review, conducted by the Department of Energy and the Federal Energy Regulatory Commission, concluded that growing America’s share of the global LNG market is good for the country. FERC’s April 16 decision is in line with the DOE’s judgment that LNG exports will spur higher domestic gas production “that could be used for domestic requirements if market conditions warrant such use, and this will tend to enhance U.S. domestic energy.” FERC also concluded LNG exports will bring about “increased economic activity and job creation, support for continued natural gas exploration, and increased tax revenues” for local, state and federal governments. In other words, more economic growth, more jobs, more energy and more revenue to help close local, state and federal budget shortfalls.

Since the start of the federal review in 2010, opponents of LNG exports have tried to derail the Sabine Pass project – which would create thousands of jobs in the construction phase alone – by arguing overseas sales will increase the price of domestic natural gas. This claim was thoroughly examined during the review, and rejected, because it was “not supported by factual studies or analyses,” according to the DOE. But the DOE went even further to knock down the anti-export argument. It concluded that LNG export volumes will be so small relative to America’s massive natural gas resource – roughly 100 years’ worth – that they’re “unlikely to alter the pricing mechanism for domestic natural gas production.”

In effect, the DOE-FERC review process concluded that U.S. natural gas resources are large enough that new export demand will be met with gas production over and above what’s required to meet domestic demand. That’s important for at least two reasons. First, as any observer of the natural gas market will tell you, we already have a surplus. According to a recent report from the Associated Press, “[s]o much natural gas is being produced that soon there may be nowhere left to put the country’s swelling surplus.” Second, the DOE-FERC conclusion matches the approach taken by outside studies on LNG exports that find no significant impact on domestic prices due to overseas sales.

For instance, the Deloitte Center for Energy Solutions finds average gas prices would increase by less than 2 percent if the country exports 6 billion cubic feet a day of gas in the form of LNG. The Brookings Institution also finds that 6 bcf a day of exports – roughly 2 bcf from Sabine Pass and another 4 bcf from two additional projects with applications before both the DOE and FERC – will have “modest impacts on domestic prices.”

So rather than try to make better arguments in future DOE-FERC reviews, LNG export opponents are trying to change the rules. They want to abolish the nation’s current natural gas policy – yes, the U.S. has a policy, and it’s working – and legislate a blanket ban on LNG exports. They argue the government should try to depress prices by walling off the U.S. natural gas industry from international markets. By this logic, exporting even a small volume of a domestically produced commodity will cause economic hardship at home.

Of course, this argument defies both common sense and experience. For instance, America’s farmers export huge volumes of agricultural commodities over and above what’s needed to supply the domestic market. Yet Americans enjoy some of the most affordable food in the world, according to data from the U.S. Department of Agriculture. Would anyone in Washington seriously tell the nation’s farmers they can no longer sell wheat, corn, soybeans or other food products to other countries?

Of course not. If the answer is that obvious for agricultural producers, it should be just as obvious for energy producers.

(These comments were submitted by Bill Cooper President of the Center for Liquefied Natural Gas.)

The United States already has a national policy in place on natural gas exports. Expanding our presence in the global LNG market will create new American jobs, boost our economy, enhance the nation’s energy security, and generate higher tax revenues for local, state and federal governments. Accessing that new market will also require the construction of LNG export facilities -- projects that will themselves create many construction and manufacturing jobs.

This opportunity is made possible by an energy transformation that’s taking place in our country. Discoveries of shale gas have revolutionized the scale and future of America's natural gas supply. In fact, shale gas resources are now so vast, they can last for nearly 100 years at current consumption levels.

Even in its early stages, the country is already seeing the positive economic benefits of the shale gas revolution. The volume of shale gas development in regions throughout the U.S. such as Pennsylvania, Arkansas, Louisiana, Texas, and many others has already lowered utility bills and created thousands of jobs, many of which are in areas that have long suffered from economic decline.

With more access to domestic natural gas supplies than ever before, The United States now has the opportunity to capture even more benefits for the economy by exporting natural gas in the form of LNG. And with natural gas supplies so plentiful, the amount of proposed exports accounts for less than five percent of America's natural gas resources, which means we would still have an abundantly secure supply of natural gas to continue to meet our domestic needs for generations to come.

Exporting natural gas, as with exporting any product, would mean more than energy security for the United States. Indeed, it represents an opportunity to reverse the trend of lost jobs, rising trade deficits, and a declining manufacturing sector.

Although the need to import LNG will continue, due to supply bottlenecks in certain regions of the U.S. such as the Northeast, the ability to export LNG will put the U.S. in the unique position of being able to both import or export natural gas depending on market and regional conditions. Consider: a healthy natural gas industry operating in a free market environment will continuously create and sustain thousands of jobs. According to the U.S. International Trade Administration, each $1 billion of LNG exports could result in over 6,000 new jobs.

Exports will allow more money from around the world to flow back into the U.S. -- which means more American jobs, increased investment in America, and a substantially stronger dollar. As Energy Secretary Steven Chu has said, "Exporting natural gas means wealth comes into the United States."

And yet there are those who insist that natural gas exports will only raise natural gas prices and hurt consumers. Some Critics of LNG exports want to alter America’s existing natural gas policy and have the government impose trade barriers in an attempt to control prices. But such proposals are inconsistent with U.S. efforts to lower trade barriers in other countries and open markets to products made by American workers. Those proposals are also based on the mistaken belief that the only source of domestic natural gas is in those areas where we are currently producing. And if there's one thing that the past several decades have proven, it's that theories assuming limited energy resources are constantly undermined by technological advancements. American innovation has brought us this far, and this is just the beginning.

Not to mention that natural gas prices are influenced by a range of factors, from weather, to the cost of developing and producing resources. The cumulative effect of a healthy natural gas industry operating within a free market brings a wealth of economic benefits that will offset any price increases. By embracing LNG exports, the U.S. will benefit greatly from the generated revenues that will be invested back into the U.S. economy.

For the first time in decades, America holds more power over its own destiny with respect to energy security and within the global energy marketplace. The U.S. can finally begin to tip the scales of the global market more in its favor.

The only question is, will we embrace that future?

What should U.S. policy be on exporting fossil fuels such as natural gas, coal, and refined oil products?

Being an economist I find this question rather bemusing.

Why should we even think about controlling exports? It is an absurdity. Oil, gas and coal are not high-tech weapons or computer systems that could be used against us. There is no intellectual property content that could be pirated in a barrel of crude oil. We are also not in times of shortage or access stress to oil, gas and coal.

Our trade deficit is sometimes as much as half due to imports of oil. Please see the excellent report out of CRS called “U.S. Trade Deficit and the Impact of Changing Oil Prices” at: http://www.fas.org/sgp/crs/misc/RS22204.pdf/ If anyone doubts the importance of getting our oil trade deficit a bit more even than we can talk a bit about why this leaves us more vulnerable than we need to be given the resources we now know we have.

Why not try to even this drain on our wealth by not only producing more of it in the country and exporting it to countries with which we have large trade deficits, such as China.

By allowing exports of gas and oil from shale and other unconventional resources we could increase the investments in the production of oil and gas in the country. The US could become the next Middle East of oil and gas production. Why thwart that? It just makes not economic sense. It also makes little sense for the government budget.

We have massive debts at the federal, state and local levels. The production of oil and gas can help resolve those debts in the medium to long runs in many ways. One is to directly tax the production of the oil and gas in a proper manner that will bring very large amounts in the coffers at the federal, state and local levels, but at the same time not thwart investment in exploration, production and more related to oil and gas. We could also add in “environment” taxes at fairly small levels at first and then phase-in. higher levels over time. Many of the large oil and gas companies have already adjusted to such environment taxes in the EU and elsewhere. So now we have two sources of taxes to send money into the stressed out budgets of many levels of government.

We could also have tax credits for those companies willing to explore and produce new sources of oil and gas, but also focus on R&D and other investments in energy efficiency, the $3 trillion bill sitting on the ground in front of us, and carbon capture and sequestration. Some of these companies are already doing this overseas. Some might even see that there could be huge profits involved in developing carbon sequestration and capture technologies and infrastructures.

The best way to make change happen is to make sure there are profits involved for those investors and companies involved, not by edicts form above and command and control directives with mixed messages. Frankly, having government officials who are not privy to emerging technologies and their potential effects direct the industry to go in the direction they see as politically best could end up with “unintended consequences”. There are significant chances that these directives will push companies to invest less here and more overseas where regulations are less stringent.

Why is that important? Climate change is a global issue. For those who firmly believe this is happening or will happen they should understand that the solutions to such a global problem require global solutions, not just moving investment from the US to another place that may be more convenient for investments.

So, to put this in everyday language: stopping exports is not a smart thing to do. This is the sort of thing a country does during times of war or during times of energy famines. We are in the midst of neither. Any climate change legislation connecting in with the exports should really consider global impacts, not just the local, state and country-wide impacts.

I see no problem with the export of refined products from the US. About 80 percent of these exports are not gasoline. Most of our refined products exports are residual fuels, petroleum coke, diesel, and heating oil. See: http://fpc.state.gov/documents/organization/188187.pdf Most of those exports go to Brazil, Mexico and the EU, where these sorts of fuels are in greater demand than here. Diesel is the chosen auto fuel for most drivers in the EU. Gasoline is used for most here.

Our exports of gasoline are a small percentage of our overall demand for gasoline. Hence the effect on the price of gasoline in the US due to exporting the gasoline is minimal.

And, once again, our gasoline prices are not high. We have some of the lowest gasoline prices of any industrialized country. Most of the EU is looking at over $8 per gallon. The Turks are paying close to $10 per gallon. So, shall we stop whining?

Most of the “blame” for the increase in gasoline prices is due to the increase in the price of crude oil, and especially Brent crude. Please see page 16 of this report: http://fpc.state.gov/documents/organization/188187.pdf

The spread between Brent and WTI has pushed some Eastern US refineries to slow down production and even shut down. The refineries that can get the cheaper oil are winning. To cut the spread we will need to build in more pipeline systems, and more efficient pipeline systems in the north-center and mid-west of the country to get the excess oil in Cushing and stranded oil in Canada, aka the oil sands, out. Canadian oil is selling at a steep discount and is being shipped more and more by rail. We need to get our oil transport up to speed in order for the entire country to get up to speed economically. Ask anyone who is unemployed or underemployed about that idea over a cup of coffee?

If some of the oil from Canada via these pipelines is exported so what is the worry? A grand majority of it will be used in the US to help temper our gasoline prices and to also make sure we have greater access to more diversified sources of oil in the event the world gets even riskier and more complex. I find it odd that some of our politicians are asking for much cheaper gas and at the same time are pushing to bomb Iran. These are mutually exclusive goals. The politicians who are doing this should really take a refresher course in basic economics. I would be willing to sit down with them over tea and explain things to them in a diplomatic and down-to-earth way.

Crude oil exports have certain restrictions that go back to 1975 and the Energy Policy and Conservation Act. These were times of energy shocks from the outside from the oil embargo due to the 1973 war. The Department of Commerce also has rule for times of “short supply”. There are also regulations based on whether the oil comes from federal land, the SPR, the Naval Petroleum Reserves and the OCS. See pages 21 and 22 of http://fpc.state.gov/documents/organization/188187.pdf .

However, we also have agreements with the WTO, NAFTA, etc. that may restrict our ability to restrict the export of refined products. Export taxes could also be a Constitutional problem given that Article 1, section 9, clause 5 states that federal government cannot tax exports from any state. See: http://www.archives.gov/exhibits/charters/constitution_transcript.html.

There are numerous very complex legal and other issues that need to be navigated in order to decide to export or not export refined products. With all of the brouhaha about exporting gasoline these exports are really a tiny part of our overall use of gasoline in a day and have no real impact on our gasoline prices. These exports of gasoline are also a new phenomenon and most likely much due to the recession and the declining demand for gasoline in the country. When the country really starts to get out of the recession in a very big way, and this will happen with the help of oil and gas production as well, then gasoline demand may start up again. We will need those refineries operating. Refineries margins are now quite thin. Refineries are closing down in some places.

Restricting the export of natural gas from the country will have the tendency to reduce investment in exploration and production of natural gas. It will also harm out potentially much better trade balance. It could also slow down our abilities to deal with fiscal issues at the local, state and federal levels. This may also harm employment. As gas is exported there may be some increase in price, but I doubt very much it will be as much as reported in the press. Also, as the prices go up there will be more exploration and production and, hence, more gas finds will happen and will help in many ways.

With increased natural gas production and the increased infrastructure that will go along with it we could speed up the movement to natural gas and methanol transport systems. We could diversify our transport energy use away from the 97 percent oil-based products. At the same time we could end up producing less CO2 per mile driven and per BTU burned as we move to natural gas transport.

With the much lower natural gas prices we could also help electricity generation move from coal to natural gas. It is already happening. Even some of the large coal companies have been diversifying into natural gas. They see some of the future coming.

We should not be focusing on the marginal issues, such as exports of refined products. We should be focusing on greater energy efficiency, greater production of oil and gas in the US, and figuring out ways of leveraging the income and wealth to be produced from the new oil and gas production to help the country improve its fiscal and trade situations.

At the same time we could use the improving fiscal and trade climate to look into how we could move to a better energy future.

Imagine if Congress forbid General Motors from exporting any of the vehicles it builds. Such a move would undoubtedly be met with a public outcry, especially considering that Detroit-made automobiles contribute a tidy portion of the more than $200 billion a year that the U.S. exports in transportation equipment.

Exports are a good thing. They help create American jobs and grow America’s GDP. President Obama specifically laid out a plan for the United States to double its exports over the next five years. For those reasons and many others, it’s not only perplexing but unsettling as well that a cabal of policymakers is pushing to curtail our ability to export domestically-produced fuels to overseas markets.

The decision by domestic producers of natural gas to export their product is a no-brainer. The price of natural gas on the American market is significantly less when compared to the markets in Asia and Europe. The demand abroad outstrips domestic demand, too. Combine these two statements, and it is understandable why people would want to export natural gas to foreign markets.

Any other American industry would be encouraged to reap the benefits of this comparative advantage. Instead, the natural gas industry is being confronted with barriers prohibiting growth and expansion. If an export ban is imposed, more Americans will be put out of work. Contributing to unemployment is not the most logical pathway for Congress to pursue as the United States begins to recover from the economic recession.

Moreover, banning the export of natural gas smacks of protectionism. The Obama administration recently complained that China does not play by the rules when it protects industries. If we want China to play by the rules, we must do the same ourselves. The United States should recommit itself to its free trade roots and refuse to partake in protectionist activity.

Congressmen backing anti-export moves, particularly Rep. Ed Markey (D-MA), suggest that exporting would impose a burden on the American public. Strangely these policymakers do not argue that Detroit exporting cars or Boeing exporting planes is a burden on the American people. When Detroit exports cars or Boeing exports planes these exports create jobs for Americans and the same is true for natural gas exports. Putting Americans back to work is a top priority for all policymakers and the growth of the energy job sector should be considered when discussing the ban on natural gas exports.

Arguing that the exportation of natural gas will have an adverse effect on natural gas prices is not economically sound. Organizations including Deloitte and the Brookings Institute have suggested that the natural gas economy is dynamic. We have the resources to produce natural gas for domestic and overseas consumption for hundred years without serious price shocks.

Allowing natural gas to be exported is the right choice for our economy. It will grow jobs, boost our GDP and bring the U.S. one step closer to realizing the President’s goal of doubled export growth.

While the nation struggles to find solutions to the current economic crisis, there has been a sharp focus on the country's newly abundant supply of natural gas as a potential cure---and rightly so. However, those that advocate unlimited natural gas exports are taking a short-sighted approach, missing the tremendous opportunity to leverage domestic natural gas to spur a manufacturing Renaissance in the U.S.

Already the prospect of advantaged and abundant U.S. gas has sparked domestic investment in many manufacturing industries, such as petrochemicals, fertilizers, glass, aluminum and steel. These investments will convert natural gas to products for export that deliver up to eight-times greater value than simply exporting the gas itself because American manufacturers use natural gas both as a fuel source and as a raw material to create high-value products. This initial use of natural gas begins a chain reaction that stimulates investment, creates jobs and strengthens the economy well beyond what gas production and export alone can achieve.

Take the U.S. chemical industry for example. The American Chemistry Council estimates that a 25 percent increase in the production of shale gas and ethane (a shale gas derivative) would create more than 400,000 new jobs along the entire value chain, $16 million in investment, more than $130 billion in economic output and $4.4 billion in new tax revenues.

However, supply and demand must be balanced in a way that allows gas producers to maintain supply at stable, globally competitive prices that spur manufacturing growth and deliver reasonable costs for all consumers. Manufacturers may be the most price-sensitive users of natural gas and a rush to artificially create demand or constrain supplies would destroy the competitive advantage abundant, affordable domestic natural gas is creating for the U.S.

Policies that artificially accelerate demand, especially in-elastic demand, upset the natural supply-and-demand balance necessary to keep natural gas prices affordable for U.S. manufacturers. This includes unlimited exportation of natural gas.

Fair and free trade must be supported in a nationally prudent manner. A sound energy policy that promotes U.S. economic growth is needed for us to realize the tremendous opportunity domestic natural gas presents.

Alternatively, exporting amounts of natural gas that drive prices closer to the global price of crude oil will inhibit this once-in-a-lifetime opportunity to restore U.S. manufacturing and miss a golden opportunity to create high-paying middle class jobs and bring back economic prosperity.

Earlier this year, Energy Secretary Steven Chu said that exporting American natural gas will boost the U.S. economy because “exporting natural gas means wealth comes into the United States.” The secretary’s is a welcome voice of reason at a time when we are hearing increasing calls from policy makers to outlaw all exports of U.S. oil, petroleum products and natural gas.

We understand the frustration among lawmakers and others who feel they must do something – anything – to ease their constituents’ pain at the pump. However, gasoline prices are determined by the price of crude oil, and that price is set in the world market. Banning exports would do little to help U.S. consumers, in the short run. And, in the long run, it could do the opposite by discouraging investment in new exploration and production, potentially leading to fewer domestic supplies.

American producers export their products– whether it’s wheat, corn, steel, ethanol or diesel and natural gas – because the supply for those products in this country outstrips the demand and they find more demand for their products elsewhere. It is the basis for world trade, without which the United States and every other country would be just like North Korea – isolated and impoverished.

One fact that is overlooked is that most of the refined products we export are diesel, waxes, oils, coke, asphalt and other products that are relatively in low demand in this country. Looking specifically at gasoline and gasoline blendstocks (components used to produce finished gasoline), we have to make one thing clear: the United States remains a net importer of gasoline. Yes, we do export some gasoline, mainly to Mexico, Brazil and other rapidly expanding Latin American economies. But overall, even as U.S. refiners produced record amounts of gasoline last year, we import more than we export.

So, the question then is, why export at all?

It’s simply a matter of economics.

A slower economy has meant that U.S. businesses and consumers have been using less gasoline. In addition, Americans are driving less and they’re driving more fuel-efficient cars – and there has also been an increase in the use of biofuels, which has reduced demand for gasoline.

However, most of the nation’s refinery capacity is located along the Gulf coast, which means that there’s more than enough gasoline to meet that region’s demand, but the same is not necessarily the same in the Northeast. So the issue is how best to economically transport gasoline into the Northeast. Current pipeline capacity is not sufficient to handle enough additional gasoline, so new pipelines would have to be built, or the fuel would have to be shipped via tanker. Either way, consumers could end up paying more. In fact, historically, it has often been cheaper for the consumer to import gasoline from Europe into Northeast markets, and that is exactly what is happening.

But what about that extra gasoline that Gulf coast refiners have? Well, often the most economical solution is to ship it to markets in Latin America. It’s a win-win-win situation for all: Northeastern consumers may get less-expensive fuel, Gulf coast refiners are able to sell all the gasoline they produce – and consumers in these other countries purchase U.S.-made gasoline, providing income back to U.S. refineries and improving the nation’s trade balance.

One other point that must be made is that most U.S. refineries are going through a period of relatively low earnings. So low, in fact, that U.S. government figures show that, as a group, refiners actually lost money in November and December of last year. Forbidding refiners from exporting their products could do real harm to their ability to remain in business and could put in jeopardy thousands of jobs.

And we can’t ignore what discouraging investments would do to future domestic supplies. It would reverse the recent trend towards energy self-sufficiency and jeopardize our energy security by once again putting us at the mercy of producers in unstable regions of the world.

As our economy struggles to reach full recovery, and as we move further along the path to greater energy security, America must look beyond political expediency. The last thing we need is isolationist policies that would harm consumers, hurt producers and cost us jobs and tax revenue.

In 2011, for the first time in 62 years, the United States became a net exporter of oil products. To consumers who are watching their family budgets being crushed by rising gas prices, this is a shocking development.

VIDEO LINK: http://www.youtube.com/watch?v=CjKfNZUdag4&feature=player_embedded

American drivers are increasingly unhappy that the price of gas is fueling record profits for big oil companies, sending trillions to OPEC nations like Iran, and keeping an oil market casino open for Wall Street speculators. Now, Americans learn that their oil, produced on land paid for by their tax dollars, is being sold to China, Brazil and other nations so that big oil companies can make even more profits.

But ask an American manufacturer of steel, plastics, fertilizer, chemicals or other products about “gas prices” and they’ll flash a smile. That’s because they’re thinking about natural gas prices, which are hovering at 10-year lows. That’s because, unlike oil, natural gas is a domestic market, and America sets her own price.

Right now, America’s natural gas is about six times as cheap as it is in Asia and four times as cheap as Europe. That is a competitive advantage for U.S. companies, leading to an American manufacturing renaissance. Nearly 500,000 manufacturing jobs have returned to the U.S. in the last two years and cheap natural gas is a major reason why.

What’s the number one way this progress could be stopped? By exporting America’s natural gas.

The Department of Energy has already approved one export terminal, and has eight more under consideration. If all of these export terminals were approved and full export capacity utilized, the Energy Department says natural gas prices could rise by up to 54 percent. And those price increases are just the result of approvring the firsteight terminals. If subsequent export applications are approved, natural gas prices in the U.S. could go even higher.

Right now, major oil companies are also nearing agreement on a plan to send American natural gas from Alaska to China. So in addition to cheaper Chinese labor and predatory Chinese trade practices that put American manufacturers at a competitive disadvantage, Chinese companies would also have low-cost American energy. If China won’t give us their rare earths to put into our solar panels and cars, why should we send them our cheap natural gas? That would be a one-way ticket to manufacturing oblivion.

Oil and gas companies will claim that natural gas is getting too cheap to keep drilling. Yet as prices have dropped, natural gas production has risen and consumption has followed. In the first few months of this year, there was a nine percent increase in American production of natural gas compared to last year.

As a result of these low prices, utilities are switching from coal to cleaner burning natural gas, buses and trucks are switching from imported oil to domestic natural gas, and companies are building more factories in America. Heating with natural gas now costs half as much as heating with oil, which has led to nearly 500,000 households in the northeast to switch to natural gas for home heating in the last four years. These markets will continue to grow. Natural gas companies should focus more on gas exploration instead of consumer exploitation through exports.

I have introduced bills that would call for a “time out” on the exportation of America’s natural gas. Because if we go down this path and export America’s natural gas to foreign nations, I fear we will once again need to export American men and women abroad to deal with energy-related conflicts. We should keep America’s natural gas here in America, where it can benefit our industries and our consumers.

You know we’re deep into the silly season when ‘progressives’ champion reverse protectionism – banning exports – as a solution to America’s economic woes. Congress should reject such advice for at least six reasons.

(1) Export bans are confiscatory, a form of legal plunder.

As economist Richard Stroup has often pointed out, property rights achieve their full value only when they are “3-D”: defined, defendable, and divestible (transferable). A total ban on the sale (transfer) of property rights in petroleum products or natural gas would reduce the asset’s value to zero (assuming no black market and no prospect of the ban’s repeal). To the owner, the injury would be the same as outright confiscation. A ban on sales to foreign customers would be similarly injurious, albeit to a lesser degree.

The foregoing is so obvious one is entitled to suspect that harming oil and gas companies is the point. I would simply remind ‘progressives’ that the politics of plunder endangers the social compact on which civil government depends. Why should others respect your rights when you seek to deprive them of theirs? Every act of legal pillage is precedent for further abuses of power. Do you really think your team will always control the White House and the Senate?

(2) The proposed bans would violate U.S. treaty obligations under the General Agreement on Tariffs and Trade (GATT) and the North American Free Trade Agreement (NAFTA).

Let’s start with the proposals, championed by Rep. Ed Markey (D-Mass.) and Sen. Ron Wyden (D-Ore.), to prohibit the export of petroleum products made from oil sands crude shipped via the Keystone XL Pipeline. This policy violates the two most fundamental principles of the global trading system: national treatment (treat foreigners and locals equally) and most-favored-nation (treat all trading partners equally).

The national treatment principle prohibits importing nations from discriminating against a foreign commodity, service, or item of intellectual property once it has entered into domestic commerce. The moment Canadian crude crosses the border, whether via Keystone XL or any other mode of transport, it becomes part of U.S. commerce. Thus, under both GATT (Article III) and NAFTA (Articles 301, 606), it must be accorded national (equal) treatment. Since Congress does not ban petroleum products made from U.S. crude, the Markey-Wyden proposals are discriminatory and in conflict with U.S. treaty obligations.

The proposals also flout the most-favored-nation principle (GATT, Article I), which holds that if you grant a privilege to one trading partner, you must grant it to all. Markey and Wyden would not require OPEC crude and products made from it to “stay here.” The restriction would apply only to Canadian crude and the associated products. Wittingly or otherwise, Markey and Wyden would grant most-favored-nation status to OPEC but deny it to Canada. A more foolish way to treat our closest ally and biggest trading partner would be hard to imagine.

The rejoinder to this criticism is that Wyden and Markey don’t go far enough – Congress should ban all petroleum product exports (and natural gas exports, too). That would place domestic and national commerce and all trading partners on the same, non-discriminatory footing. Nonetheless, the policy would still be unlawful under GATT.

Article XI: 1 of the 1994 GATT states:

“No prohibitions or restrictions other than duties, taxes or other charges, whether made effective through quotas, import or export licenses or other measures, shall be instituted or maintained by any contracting party . . . on the exportation or sale for export of any product destined for the territory of any other contracting party.”

Although “duties, taxes or other charges” on exports are permissible, quantitative export restrictions such as quotas and bans are “prohibited,” argue Lode Van den Hende, Jennifer Paterson, and Herbert Smith in Bloomberg Law Reports.

There are exceptions. Under Article XI: 2, export “prohibitions or restrictions” may be “temporarily applied to prevent or relieve critical shortages of foodstuffs or other products essential to the exporting contracting party.” However, America is not facing “critical shortages” of finished petroleum products or natural gas. Natural gas is cheap today because it is plentiful, and gasoline is pricey not because it is in short supply but because crude oil prices are high.

Article XX(g) permits export restrictions “relating to conservation of exhaustible natural resources.” However, note Hende, Paterson, and Smith, “if there is evidence that an export restriction is designed to protect or promote a domestic processing industry, then Article XX(g) cannot be used as a justification.” Promoting domestic manufacturers who use petroleum as a feedstock is Rep. Markey’s leading rationale: “I make the amendment because I want a low price for the oil for toothbrushes, for steel, for pantyhose, for anyone that makes that product here in the United States”. Similarly, Markey argues that DOE should reject license applications to export natural gas so that feedstock prices will be lower and domestic manufacturers more competitive.

(3) Banning exports will discourage production, investment, and job creation. Thisis too obvious to require elaboration. The smaller the market U.S. companies are allowed to compete in, the smaller their potential sales volume, revenues, and profits. An industry crippled by exclusion from the global marketplace will attract less investment, create fewer jobs, and generate smaller tax receipts. Banning exports restricts wealth creation and undermines U.S. prosperity. Not good!

(4) Banning exports will increase the U.S. trade deficit. Indeed, how could it not?Petroleum products are now America’s leading export, with sales abroad reaching about $88 billion last year. Wyden, Markey, and other export-banners decry the U.S. trade deficit and urge policymakers to do more to ‘level the playing field’ and help American companies compete. Yet they want to kneecap America’s biggest, fastest-growing export sector. The only ‘logic’ operating here is political (that which harms oil and gas companies is good).

(5) Banning energy exports would expose America to charges of rank hypocrisy. Rep.Markey is a leading critic of Beijing’s export restrictions on rare-earth elements. Rare earths are used to manufacture the ‘clean tech’ products of which he is so fond, including hybrid and electric vehicles, solar panels and wind turbines. In March, the U.S., Japan, and EU launched a WTO case against China’s restrictions on rare-earth exports. We cannot flout the same treaty obligations and trade principles we invoke without looking ridiculous and duplicitous in the eyes of the candid world.

(6) Banning energy exports would backfire, harming those the policy supposedly aims to help. Proponentsclaim banning energy exports will increase domestic supply, which will lower price, which will then ease pain at the pump and make U.S. manufacturers more competitive. But if this is such a great idea, why don’t we do it for agricultural products, automobiles, or any other product made in the USA? Or why don’t we insist that if U.S. products (e.g. computers, confections, pharmaceuticals) are made with imported parts or materials, those products must “stay here” for the benefit of U.S. consumers? It’s because if we applied the proposed export ban to other industries, it would bankrupt them.

For the same reason, banning energy exports would backfire, harming the very consumers and manufacturers the policy is ostensibly intended to help. In the short term, banning exports might lower prices by producing temporary gluts in domestic markets. But the policy’s adverse impacts would be severe and lasting.

Cut off from global demand for their products, producer and refiner profit margins would decline. Oil and gas-related capital, production, and jobs would migrate to countries that do not wage political warfare on hydrocarbons. U.S.-based producers would drill and frack less; domestic refiners would idle capacity and invest less in efficiency upgrades. Domestic prices would rise as domestic output falls. Domestic prices would also rise because consumers would depend more on foreign suppliers who face less competition from U.S. producers.

Conclusion

Banning energy exports makes no sense except as a strategy to harm those who frack gas and refine oil for a living. The logic behind such policies is that of party and faction, not economics. Proponents seek to deprive fellow citizens of property rights essential to their survival and success in the global marketplace. It is a sign of how far America has strayed from the constitution of liberty envisioned by the founders that Congress is debating such policies today.

What should U.S. policy be on exporting fossil fuels such as natural gas, coal, and refined oil products? The answer boils down to a simple fact. Free trade benefits nations; managed trade and impeded trade don’t. This reality is bolstered by overwhelming historical and economic evidence.

If the subject was whether John Deere should be able to export tractor equipment or U.S. farmers should be able to export food, this wouldn’t be an issue. Increased exports of those products are seen as an economic good. The best policy for the U.S. independent of what is being exported is to let the market work. It is hard to think of a Washington “fix” in recent memory that didn’t make the problem being addressed worse.

For decades, politicians and some in the media have been wringing their hands about increasing imports, especially oil, and the related balance of trade issues. Now with petroleum product exports increasing and oil imports decreasing, the usual suspects are at it again—using gasoline and diesel exports now as a reason to blame oil companies for high gasoline prices.

As National Journal reporter Amy Harder pointed out in her recent “Gas Cap” article:

You would think that with the country’s massive trade deficit and the sluggish recovery, Washington would be doing everything in its power to boost energy exports. But that’s not the case, and the reason is a familiar one: the politics of gasoline prices. Lawmakers fear that exports raise domestic prices and run counter to the country’s goal of being energy-independent, even though the premise is based on a fundamental misunderstanding of the relationship between supply and price.

Although this week’s question focuses on oil product exports and the political reaction to them, it really is a commentary on the sorry state of politics, political discourse, and a widespread lack of critical thinking. It is also a case study of how communication technologies and the 24 hour news cycles are being used to promote pseudo theories and pseudo facts.

As a nation, we have elected too many politicians whose main objectives are self-promotion and representing special interests instead of the public interest. Sound bites and extreme partisanship have replaced governing. As a result “gotcha” politics have been substituted for solving problems. And this partisanship is not limited to politicians. It extends to media talking heads who spend too much time using National Enquirer techniques to sensationalize and reinforce prejudices instead of reporting “news”.

None of this is new. It is has just gotten worse. In his 1962 book The Image: A Guide to Pseudo Events in America, the late historian Daniel Boorstin observed we have become a nation where images are valued more than actual facts. According to Boorstin, we have reached the point where reality is tested by the image instead of the image being judged against reality. As a result the value of facts and critical thinking has diminished.

As a nation, the U.S. ranks as one of the top three exporting countries—totaling more than $1.5 trillion last year alone. Exports of goods such as machinery, industrial supplies, auto parts, food, etc. increase employment and national wealth. No one sees exports of those goods as imposing a burden on consumers. The same is true of oil product exports and should be seen as such. Only political scapegoating prevents that from happening.

The notion that gasoline and diesel exports are leading to higher prices represents a triumph of ignorance and partisanship over reality. A steady decline in the demand for gasoline because of economic factors, demographic conditions, and improved technologies has lead to a major reduction in imports and an excess refinery capacity. Faced with those conditions, which are projected to persist, refiners have two choices. First, close facilities as some have done in the Northeast because they are no longer profitable. Or second, ramp up production and export to Latin America where demand is growing. In the first instance, investment and employment suffer. In the second, they are maintained or increase. If the export of oil products was curtailed the economic consequences would be negative, less domestic investment, less employment.

This is not new information. The Energy Information Administration has provided data making clear that exports are not causing higher gasoline prices. Unfortunately, that is ignored because it doesn’t support the pseudo theories that are being used to attack oil companies and pursue political agendas.

The price of gasoline is driven by crude oil prices which are set on the world market. The focus of debate should be on actions that would lead to a substantial increase in domestic production, a further reduction in imports from unstable regions, and regulatory changes that would lower the cost of producing gasoline. Lower processing costs and increased global supply are in the consumer’s interest because they can lead to lower prices. In the current political climate, none of that is going to take place.

Energy problems and other national issues won’t be solved until the public does a better job of holding elected officials accountable for solving real problems by governing which means compromising. Ideological litmus tests are corrosive of better government.

The question we should be asking is not – export/don’t? – but how we can break the power that fossil fuel monopolies have over their own prices, our economy and the global environment. Unfortunately, the current raft of fuel export proposals are not driven by a surplus of domestic energy – they are motivated by producers seeking access to monopoly prices that dominate international energy markets.

Begin with natural gas. Gas at $2 won’t last – it costs more than that to produce – but gas at $5-6 would be an enormous boon for the American economy and help displace the dirtiest of our fossil fuels, coal. Globally natural gas producers tie their prices to oil, with its OPEC monopoly – natural gas is running $18-20, for example, in Japan. You can’t blame US producers for lusting after those rates.

But turning gas into LNG should always be a last resort, because liquefying and shipping it wastes 30-40% of its energy content and hikes its carbon emissions equivalently. (However climate friendly you think pipeline gas might be, LNG is definitely not.) Instead, US should use its newly abundant natural gas to speed the retirement of costly, dirty coal, and deploy it domestically in transportation for fleet vehicles and other uses where its 3-2 cost advantage over gasoline is critical. But the oil companies have blocked development of a distribution networks for natural gas vehicles, leaving US drivers stuck with $4.00 gasoline, while private utilities hold on to the monopoly profits their old coal plants bring them – even if it raises utility bills. So gas producers, blocked from using their gas efficiently in US markets by domestic monopolies, seek overseas markets fattened up by global cartels.

Possible result: much higher domestic prices for natural gas, more greenhouse gas pollution, and even a possible return to coal – not my opinion, but the Energy Information Agency’s: "Increased natural-gas exports lead to higher domestic natural-gas prices, increased domestic natural-gas production, reduced domestic natural-gas consumption and increased natural- gas imports from Canada via pipeline," the department said in the January report.

Oil exports are a variant on the story. The US exports diesel and gasoline from the Gulf Coast to Europe and Latin America, and then imports the same products to the eastern seaboard at a higher price. That’s because the global oil cartel doesn’t want to pay US wages to the crews of the tankers – instead they waste fuel and carbon avoiding an obvious, efficient domestic route. Now Canada wants to use Texas refineries in the same kind of play, so that it no longer has to make do with the more modest prices tar sands bitumen brings in the Midwest, but can take reap much fatter global oil prices. That’s really what the Keystone Pipeline is about – how to waste more underpriced natural gas producing dirty tar sands oil for refining under poor environmental standards in Texas to get access to swollen monopoly European prices.

And coal? Why can it possibly make sense for Peabody coal to take Powder River Basin coal, heavy and relatively low in energy content, spend a fortune paying railroads to haul it to ports 1000 miles away, then ship it another 6000 miles to the coast of China? Well, quite simply because a) the US government gives public coal away to Peabody without even the pretense of a competitive bidding process and b) Australia, Indonesia and South Africa have created an informal but powerful coal cartel in Asia. The US Government bail-out enables Peabody to mine coal for $12 in Wyoming, and the coal cartel jumps its sale price to $120 in Shanghai.

We ought to be debating how to break these monopolies, and create fair energy markets – because that is the only way that clean energy innovators are going to displace fossil dinosaurs.

But we also ought to be worried about our imports – and not just because of their cost. Being a huge net importer means a big part of the bill for our wasteful use of carbon is being paid by someone else, and mostly someone else much less well off than we are – whether it is a fishermen in the Niger Delta, a first American in Alberta’s tar sands region, or an Amazonian community in Ecuador. The solution to our own economic dilemma, and the environmental price we are imposing on others is not to export more to keep monopolies going – but to break the power of the monopolies, stop wasting carbon, and replace fossil fuels with 21^st century solutions – using them thoughtfully while we finish the shift away from high carbon energy.

Limiting exports of petroleum products would not reduce gasoline prices in the U.S., but it would make us poorer.

In essence, the U.S. has contracted to refine petroleum for some other countries. Instead of these other countries importing the crude and refining it there, the crude comes to the U.S., where it is refined and then shipped to its ultimate destination. These other countries are outsourcing their refining to the U.S.

Because of reduced domestic demand for transportation fuels and increased productivity, the U.S. has excess refining capacity, and many refiners have been losing money. In fact, some East Coast refineries are scheduled to be shuttered this year. Preventing exports would exacerbate this problem without making gasoline any more affordable.

Laws preventing export of refined petroleum products (either in whole or in part) would simply reduce the amount of crude imported, decrease refinery capacity utilization, and cut income and employment in the refining industry. If we cut product exports by a barrel, we will import one less barrel of crude to refine. There will be no additional product for domestic markets and U.S. gasoline prices will not be affected. The only difference is we lose the refining profits and employment.

Also, it doesn’t make any difference if you try to distinguish between refined products from domestically produced crude versus products produced from imported crude. Both would reflect world prices. The same lack of distinction holds for crude produced on federal land versus crude produced on private or state land. Because we import millions of barrels of crude oil per day, all gasoline prices would reflect world crude prices regardless of the source of the feedstock.

Unlike oil, the price of natural gas is set in the domestic market. Right now, American consumers and businesses are reaping a windfall from the lowest natural gas prices in 10 years. Cheap gas has reduced heating and electric bills for millions of households, while industries using natural gas as a feedstock or boiler fuel have realized huge production cost savings. But at the same time $2.00 gas at the wellhead has caused many drilling companies to reduce production and move their rigs to more profitable oil plays.

Because of America’s large and growing reserves of natural gas, potential supply will exceed anticipated domestic demand for many years to come. But there is a huge unmet demand in other parts of the world. For example, with Japan retreating from nuclear power after last year’s Fukushima accident, the demand for gas to generate electricity has grown exponentially. But since Japan produces less than 4 percent of the gas it consumes, it must import the rest. With Germany also planning to phase out nuclear power over the next decade, that country’s need for natural gas will escalate rapidly. China and Korea are also expected to be huge gas importers for the foreseeable future. Assuming federal and state permitting issues are not a hindrance, we can export a portion of our excess gas capacity in liquefied form to Asia and other regions of the world.

Some politicians and industries are objecting to LNG exports. For example, Congressman Ed Markey of Massachusetts has introduced a bill that would prohibit the export of gas and oil from wells drilled on federal lands, arguing such exports will push up prices, reduce the competitiveness of U.S. business, and slow the transition away from dirty fuels. Some chemical companies, who are clearly benefiting from cheap gas, contend America would be better off keeping its “cheap” natural gas at home to boost domestic manufacturing. However recent studies by Navigant Consulting and Deloitte conclude the impact of exports on domestic gas prices would be minimal.

A number of environmental activists, such as the Sierra Club, are opposed to LNG exports because, they claim, the liquefaction process results in air and coastal water pollution while endangering wildlife. They also argue, with little basis in fact, that processing plants and LNG tankers are inherently unstable and prone to explosions. But their real objective is to prevent any undertaking that results in more global fossil fuel consumption.

As an energy-abundant nation, America should logically be a major energy exporter. This is already the case with coal, and there is no reason we can’t become one of the world’s largest gas exporters as well, with all the attendant job creation that will entail.

The United States has an unrivalled self-interest in serving international markets that urgently need coal to grow their economies and improve the livelihoods of their people. In fact, increasing our coal exports is an unusually clear example of how unfettered trade benefits both exporting and importing countries.

With the world’s largest coal reserves, the U.S. finds itself in the enviable position of having more of what the fastest-growing countries of the world need. China and India are lifting hundreds of millions of people out of poverty by building vast electricity grids that bring coal-generated power to homes and workplaces. Coal is the only fuel for electricity generation that is sufficiently affordable and abundant to literally bring this power to the people. It is also a vital ingredient for the steelmaking plants in Asia and Brazil that are laying foundations for a 21^st century industrial revolution. American metallurgical coal is a building block of this progress much as it is for our own industrial progress.

The benefits of U.S. coal exports are reciprocal. The U.S. has a 265-year coal supply, more than enough to serve its domestic needs. Far from depriving Americans of opportunities, coal exports provide them –high-wage jobs in coal country from Appalachia to the Powder River Basin, in the rail industry that transports coal to ports and in export terminals that exist or are envisioned for the Gulf and both coasts. The $16 billion worth of U.S. coal exported last year also delivered revenue to hard-pressed communities across the U.S. heartland.

Some critics are blinded by their wealthy lifestyles to the powerful evidence that coal-based generation has greatly improved the lives of millions abroad who are less fortunate. For the 1.4 billion people worldwide who have no access to electricity, efficient coal-based generation provides a healthier and better life. It often offsets the demands for heat and light that heretofore have been met with fuels derived from deforestation, animal wastes and uncontrolled in-home use of kerosene and other fuels.

In short, coal exports are a classic example of America’s competitive advantage. Recent history offers grim examples of what happens to countries that only buy from the rest of the world and sell nothing to them. The president appears to understand this lesson with his call to double exports in five years. Presumably he also understands how coal exports, up almost a third last year, are helping him reach this goal.

To forego this competitive advantage would be a classic example of short-sighted public policy that will only deepen the economic gloom Americans now face.

Rising oil and gasoline prices have burdened American families and businesses. Prices rose even though U. S. oil imports are significantly lower under President Obama, importing only 45 percent of our oil in 2011. Imports were 57 percent in 2008.

While imports are down, exports of refined petroleum products are up. Last year the United States exported an average of 2.9 million barrels per day of petroleum products, and was a net exporter for the first time since 1949. The Energy Information Administration reports that gasoline exports were more than 62 percent higher in 2011 compared to 2010, and theCongressional Research Service recently determined that gasoline exports continue to grow in 2012.

Gasoline exports are 7 percent of gasoline production in 2012, up from 5 percent in 2010. As of March 30, 2012, the United States exports an average of 956,000 barrels of diesel per day. This is a 46 percent increase from the annual average for 2010 when we were exporting 656,000 barrels a day.

Big Oil companies are largely behind this export boost, selling significantly more gasoline and diesel fuels to other nations. On March 27 The Wall Street Journal reported two of the big five oil companies—ConocoPhillips and Shell—are “more focused on exporting U.S.-produced fuel to markets where there is greater demand.” EIA data indicates that gasoline and diesel exports rose as their prices rose. (see graph)

The Energy Information Administration notes that “record gasoline exports do not appear to be driving gasoline prices.” But it also points out that “Gulf Coast refiners have a competitive advantage in some world markets.” These companies make more money exporting refined products to Europe and South America compared to selling them to American citizens.

Gulf Coast refiners use West Texas Intermediate crude oil, which is now typically $18 - $22 per barrel cheaper than the Brent crude used by European refiners. This makes U.S. refined fuels cheaper compared to European products. Although EIA did not find a direct link between exports and higher gasoline prices, exporting fuel rather than selling it here could deprive us of inventory that could help ease price pressure.

The export of crude oil produced in the lower 48 states is already effectively banned.[i] Limiting exports of refined products from petroleum produced from public lands or waters—as some have proposed—could increase the supply of gasoline and diesel fuel here and potentially reduce prices.

Sen. Robert Menendez (D-NJ) introduced the American Oil for American Families Act, S. 2211 on March 9, 2012. It mandates that:

Petroleum extracted from public land in the United States (including land located on the outer Continental Shelf), or a petroleum product produced from the petroleum, may not be exported from the United States.

And Rep. Ed Markey (D-MA) just introduced a similar bill in the House, the “Keep America's Oil Here Act,” H.R. 4325. Rep. Markey noted:

The oil below taxpayer-owned lands belongs to the American people, and should stay here in America to help American consumers and strengthen our national security.

The United States had a ban on the export of crude oil produced in the north slope of Alaska from 1973-1995. Instead, this oil was sent to the West Coast, increasing supplies there. In 2005 the Congressional Research Service found some indication that West Coast gasoline prices were lower during the export ban.

When Alaskan oil exports ceased, the gasoline price differential between the West Coast and the national average did decline, at least for a few years. (emphasis added)

It is unclear whether a new ban on exports of products refined from oil from public lands and waters would make a significant difference in gasoline prices, as the Alaskan ban seemed to do for at least some time. The Congressional Research Service wrote:

To what degree prohibiting gasoline exports would reduce prices is unclear. Some contend that there may be a decline in gasoline prices if gasoline exports were restricted. Others [the American Petroleum Institute] suggest there will be no decline in gasoline prices if such measures were adopted.

But certainly an additional domestic supply of gasoline and diesel produced from American oil from our soil and waters would not raise prices, and it might just lower them. The bottom line is that it makes little sense to send to other countries refined fuels made from oil produced from federal lands and waters at a time of rising gasoline prices.

The recent dramatic increase in gasoline exports is one of many actions by big oil companies that favor their profits over the interests of American consumers. (see: “Is Big Oil Rigging Gasoline Prices?”) Congress could begin to rebalance the gasoline price playing field by halting the export of refined products made from oil produced from lands and waters owned by all Americans.

[i] The Congressional Research Services notes that “Domestically produced crude oil cannot be exported as per provisions of the Energy Policy and Conservation Act as well as several other statutes. There are a few exceptions including for crude of foreign origin, crude exports to Canada, or where the President determines it is in the national interest to allow exports (15 CFR 754.2).”More Gasoline Exports = Higher Gasoline Prices?More Gasoline Exports = Higher Gasoline Prices?

“More exports mean more jobs,” President Obama said in his weekly address at a Boeing factory in the state of Washington in February. “We know what we need to do. We need to strengthen American manufacturing. We need to invest in American-made energy and new skills for American workers.”

On this issue, President Obama is absolutely right. While the president was talking about overall exports, his comments apply to exports of fuels manufactured by American refiners just as well as they apply to exports of airplanes manufactured by Boeing and cars manufactured by General Motors or Ford.

We live in a global economy, where consumers benefit most when the free market is allowed to operate without government-imposed artificial barriers on production, use and distribution of products.

Government should be encouraging all forms of energy to compete in the global marketplace to create jobs, serve consumers, pay taxes and succeed. This is how America became the world’s most prosperous, powerful and productive nation. And this is how our nation can climb out of economic tough times and build a new prosperity for Americans today and tomorrow.

It’s good news for American consumers and American workers that for the first time since 1949, the United States exported more refined petroleum products than our nation imported in 2011.

The President’s Economic Report issued in February called exports a bright spot in the economy and noted that fuel exports were “improving America’s trade balance in petroleum products.”

Some pundits and others who don’t understand the benefits of exports to the U.S. economy have wrongly stated that refiners are exporting fuels to force up the price of gasoline. This is absolutely false.

The U.S. Energy Information Administration said in a March 21 report: “The rise in U.S. (refined) product exports at a time of rising domestic product prices has led some to ask if higher gasoline exports might be causing higher gasoline prices. However, the available evidence does not support such a linkage."

Fuel exports don’t raise gasoline prices. Rather, exports bring billions of dollars to America, preserve and create American jobs, strengthen our economy and reduce our nation’s trade deficit. In fact, by enabling domestic refineries to run at higher utilization rates, exports are likely keeping consumer costs from rising further.

The price of crude oil – which accounts for 72 cents of every dollar that American consumers pay for gasoline – is the most important factor determining gasoline prices. Oil prices have risen due to uncertainty about future oil exports from Iran and other unstable areas, the declining value of the U.S. dollar in relation to foreign currencies, and economic growth that has increased oil consumption in developing countries.

In a global marketplace, American fuel manufacturers need every tool at their disposal to remain competitive with foreign refiners who covet the potential to export more of their finished petroleum products to the U.S market. In the wake of the recent closure of two Philadelphia-area refineries and the possible closure of a third, it should be abundantly clear that increasing fuel exports will help American refineries stay in business and preserve the jobs of their workers.

America is still a large net importer of the crude oil needed to make finished petroleum products. We import about 60 percent of the oil we refine. In addition, we’re not a net exporter of gasoline – we import more gasoline and gasoline blendstocks than we export. In fact, more than 90 percent of the gasoline refined in America stays in America.

Our big net export is diesel, which is manufactured along with gasoline when oil is refined. Because most Americans drive cars powered by gasoline, we have an oversupply of diesel in our country. It makes sense to sell our excess diesel supply to Europe, where most cars run on diesel, and to nations with growing economies.

American refineries are the most efficient, clean, complex and competitive in the world. They are positioned to take advantage of exporting opportunities and to continue to provide high-paying jobs to American workers and economic benefits to our entire nation.

If artificial and counterproductive restrictions are placed on fuel exports, American refineries would be forced to produce less gasoline for American consumers, because the physical properties of crude oil require us to manufacture, on average, one gallon of diesel for every two gallons of gasoline that we produce. It would be absurd to produce products that cannot be sold.

American natural gas exports are also a good thing, and should be welcomed and encouraged to create jobs, increase tax revenue and strengthen our nation’s economy.

Thanks to horizontal drilling and hydraulic fracturing, production of natural gas in the United States has risen dramatically in recent years. As a result, in addition to providing an abundant supply of energy for domestic use, companies have also proposed exporting large amounts of natural gas from terminals around the United States.

America exports $2.2 trillion worth of products of every kind each year. If banning fuel exports represents sound fiscal and economic policy, it would logically follow that America should ban all exports from our nation’s factories and farms. But no one would suggest that, because it would destroy millions of American jobs and cause tremendous damage to our economy.

If all American manufacturers and agricultural interests were prohibited from exporting their products, they would produce less – and that could actually raise consumer prices.

Banning beef exports wouldn’t lower the price of a hamburger, banning auto exports wouldn’t lower the price of a car and banning fuel exports won’t make gasoline cheaper.

In his 2010 State of the Union address, President Obama announced the National Export Initiative and set a goal of doubling U.S. exports by the end of 2014 to support millions of U.S. jobs, saying that this was an important step to “winning the future.”

Let’s follow President Obama’s lead on increasing exports and help him achieve his goal.