Democrats ask Biden to ban oil exports

New York (CNN Business) – Nearly a dozen Congressional Democrats are urging President Joe Biden to combat high gasoline prices by not only releasing barrels from the US Strategic Petroleum Reserve, but also by banning US oil exports, according to a letter seen by CNN.

The letter sent to Biden on Monday adds to the pressure facing the White House, including from his own party, to lower prices that are angering Americans and contributing to the biggest rise in inflation in decades.

Calling the issue “an urgent matter,” House Democrats led by California Rep. Ro Khanna called on Biden to ensure “affordable and reliable energy for American families.”

“We must use all the tools at our disposal to reduce gasoline prices in the short term,” the letter read. It was also signed by eight other Democrats, including Representatives Barbara Lee, Katie Porter, Darren Soto and others. Senate Democrats sent Biden a similar letter earlier this month.

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‘It is not a panacea’

Biden could be ready to use one of those tools as soon as Tuesday.

Biden expects to announce his decision to release oil from the strategic reserve in an economic speech on Tuesday, officials told CNN. However, the timing of such a move depends on other countries finalizing their agreements to do the same, officials said.

The spectrum of the United States, and potentially other countries, releasing emergency barrels has already helped drive oil prices down. After surpassing US $ 85 a barrel at the end of October, oil prices in the United States have fallen by around 10%. That, in turn, has helped curb rising gasoline prices. The national average is $ 3.41 a gallon, roughly the same as a week ago, according to AAA.

“Our main responsibility is how to lower the cost for working-class Americans,” Khanna told CNN in a telephone interview. “This is something that bothers people. We need to address that concern.”

However, even proponents of tapping into the Strategic Petroleum Reserve acknowledge that it is not a long-term solution. It’s more of a band-aid.

That is because there is a limited amount of oil in emergency reserves. And the release of barrels will not solve the underlying imbalance between supply and demand caused by increased demand amid the economic recovery and lackluster supply from OPEC, the United States and other major producers.

“It’s not going to be a panacea. But we have to do what we can,” Khanna said in the interview.

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Would the export ban help or hurt?

But House Democrats suggest that Biden should seriously consider the most dramatic step in banning oil exports. This, despite the fact that several industry experts have warned that such a step could backfire for American consumers.

“The ban on crude oil exports from the United States will boost domestic supplies and push prices down for American families,” the letter from House Democrats said.

This idea has reached the highest levels of the Biden administration. Rising gasoline costs so alarmed White House Secretary Ron Klain at a time that he suggested taking the dramatic step of stopping US oil exports to cut costs, an official told CNN. Administration officials believe they could secure an agreement on a coordinated deployment that would not require a ban on exports.

However, Goldman Sachs told clients last month that an export ban would likely be “counterproductive” and would have a “likely upside impact” on retail fuel prices.

Gasoline and Brent prices

This is because oil is a raw material that is traded worldwide and gasoline prices in the United States are set by Brent, the world benchmark. If the world lost access to US barrels, Brent prices would likely rise due to lower supply.

And America’s oil refineries cannot rely solely on domestic oil to produce the diesel, jet fuel, and gasoline that the economy depends on. Refineries mix US oil with foreign barrels to produce these products.

Khanna questioned the analysis of industry experts, arguing that they could conflict by warning against oil export bans.

“It is an exaggeration to argue that increasing the national supply of a product is somehow bad for Americans,” Khanna said.

Yet even Mark Zandi, an economist frequently quoted by the White House, is skeptical.

“I’m not a fan of banning oil exports,” Zandi, chief economist at Moody’s Analytics, told CNN in an email. “I doubt that it will significantly lower gasoline prices, as the price of gasoline is largely determined by world oil prices and not by the price of domestically produced oil. It is also unclear whether domestic refineries could process efficiently the type of oil that the US exports. “

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