Would reducing US fuel exports stop gas prices from spiking?
By Ron Scherer | The Christian Science Monitor | Feb 23, 2012
At the same time that the price of gasoline is rising, the US oil industry is increasing its exports of gasoline, diesel, and jet fuel.
Yes, you read that correctly.
Compared to a year ago, exports of gasoline have tripled at a time when the price of gasoline is 42 cents a gallon more expensive at the pump. On Thursday, for example, the price of crude oil remained elevated at $107 a barrel because of fears over the Iranian nuclear situation, and the price of gasoline rose 3 cents a gallon compared to Wednesday, according to AAA.
The oil industry maintains the exports are necessary because domestic demand is weak. The industry says if refiners could not send American-made gasoline to China, India, Europe, and South America, the refineries would have to close as several have already done on the East Coast. Yet, other energy observers say exporting gasoline at a time of rising prices is sort of like throwing flammable liquid on a fire.
I think it is simply disingenuous to think exports of gasoline are not a factor in the prices, says Ben Brockwell, director of data marketing and information services at the Oil Price Information Service, which provides petroleum pricing and information to the oil industry.
The crude comes from elsewhere, the US processes it and resells it. If the US were massively exporting crude, than curbing that could be a solution, but all the US is doing is processing other people's oil.
We have enough pollution with all the refineries all over the country.
We should mark up the price of the refined oil to put it in the US Treasury for sales outside of the country to encourage the countries importing the refined oil to build their own damn refineries.
The US produces about 6 million barrels of crude oil a day and that figure is going up.
We consume about 18 million.
We export quite a bit of refined oil products and crude oil.
The current rise in gas prices is about crude futures speculation. It has very little to do with curent supply and demand. This is very rich people and corporations playing with money.
Crude oil exports:
Crude oil imports?
Where importing 223 times what we export.
You said, "gasoline is processed crude oil, which the US imports almost entirely"
The US produces a lot of crude, so , "almost entirely" is a pretty gross exaggeration.
The US does export crude, mainly from Alaska, not anything near as much as we import, but some.
We export finished fuels, like gasoline, thus turning a profit. It's a complex market. It defies easy analysis but if we want to discuss it, especially with a fossil fuel defender, we need to have our facts straight.
which is to realize that we need to move this country toward an alternative, renewable type of fuel that doesn't poison our environment.
the government has allowed the oil industry to get away with raping the country for so long that
Americans have become inpatient, renewable energy is the way forward but will take time and I
don't think Americans are willing to wait that long.
We imported 845 thousand barrels per day of gasoline, mainly in the form of gasoline blending components, and we exported 616 thousand barrels per day of finished gasoline.
The larger export of finshed product is distallate fuel oil (diesel) where we imported 122 kbpd and exported 1124 kbpd. This reflects a market for diesel in Europe where diesel cars are far more popular than in the US.
the oil industry's point, which is; because domestic demand is weak therefore they need to export more, but
I thought demand is higher in US according to the oil industry? What the hell is going on here? and federal
government cannot curtail these cartels? This is really sickening...
Taking product (oil) off of the market for purely domestic consumption still leaves us with a sizable crude deficit. The act, however, of removing supply from said market would send prices skyrocketing, as we still must import a significant amount to meet our domestic needs.
It's a horrible, HORRIBLE idea.
The most effective way to combat the price pressure would be a coordinated effort among our allies to simultaneously dump a near-unprecedented amount of oil onto the market from our respective strategic reserves.
Watch the prices plummet and the speculators take a major bath.
strategic reserves are for maintaining supply to key industries and transit when there are supply constraints; there are no supply constraints, and a release of strategic reserves would only provide short-term relief from high oil prices. "Speculation" as such is probably responsible for no more than 5-10% of the cost of a barrel of oil; the real underlying reasons for the run-up in costs are increased production costs (deepwater and shale oil are much more expensive to produce) and underlying demand driven largely by growth in developing countries (oil demand in China alone has more than doubled in ten years and China now uses over 10 millon barrels a day). Global demand is around 89 million barrels a day; global production, including natural gas liquids and biofuels? Also around 89 million barrels a day. There's almost no spare capacity and demand is up against the limits of available supply; result, price increases. And flooding the markets with a sudden additional short-term millions of barrels of oil might lower prices for a week, or a month, but they'd climb back up again eventually, and probably sooner rather than later.
The market is extraordinarily sensitive to the potential (real or imagined) of a glut (80's pricing hasn't been forgotten or erased from memory banks)
A public commitment to significantly increased domestic production with a coordinated dumping of strategic reserves would lead to a downward spiral in pricing.
Oil is ultra sensitive to rumor and national policy.
Flooding the markets coupled with weak global demand should in fact result in a significantly lower price in a 6-12 month time frame.
And what makes you think global demand is "weak"? IEA estimates it at 89 million barrels a day. Which is about a million barrels a day above production figures. China, India, and Brazil are making up the declines in demand from the US and Europe; demand overall is at near-record levels.
I would publicly announce plans to drill drill in ANWR, the Rockies, as well as expediting the process to obtain and significantly increasing deep water as well as shallow water permits.
That in itself forcibly broadcasts to the world that we're serious, which would result in sharply lower prices in both the short and long term.
Remember, the entire industry is incredibly sensitive to news of expanded supply.
and that they'd have any significant effect on supply; they wouldn't. Not least because it takes an average of five years from initial exploration to full production. So you're talking about hypothetical future resources which won't affect the CURRENT market a jot and honestly by the time they came online, if they proved to yield significant oil, may only make up for production declines elsewhere in the interim.
availability of resources in the aforementioned potential fields? That in itself tells me all I need to know with respect to your degree of knowledge of extracting, procurement and exploration.
Good discussion anyway.
and there's still the problem of time lag between drilling and resource availability. I'm aware that the geological reports indicate recoverable oil in those regions but you're conveniently ignoring the fact that announcing tomorrow you're going to drill ANWR and the Rockies and everywhere else that promises recoverable oil will have fuck-all effect on domestic OR global supply in the short-term and in the long term may indeed only make up production declines elsewhere in the world--USGS median production estimates for ANWR are in the range of 700k barrels a day; the decline rates of established oilfields can be quite substantial...Mexico's Cantarell field has declined from 2.3 million barrels a day in 2003 to 464000 in 2010; North Sea oil production has declined by about 50% since 2000, from c. 6 million barrels a day to c. 3 million; there's no reason to expect that given known decline rates for existing fields an additional million or so barrels a day in five years' time will do anything at all but keep production rates on their current plateau. Your choosing to ignore this tells me that you know less about the subject than you're pretending to.
as an analyst. You evidently believe the lie of "peak oil". There's no question you know your stuff--this has been one of the better discussions I've has on DU, but you're also conveniently omitting certain factors--mainly government reluctance (as policy) to issue permits and expand refinery capability. "Old refineries" on average have had to add huge cost due to rather questionable EPA guidelines and maintenance. (I'm not talking about BP related improvements--just run of the mill compliance regulation that's seemingly never-ending)
unless you happen to believe Thomas Gold and his abiotic theory, that is. The question is in the timing, not in the occurrence; talking about a finite resource, there's no question that you reach a point of peak extractability and declining production. There are other complicating political factors (rampant nimbyism: cf the opposition to the Keystone pipeline, for instance, or opposition to drilling in ANWR, etc); given sufficient price to make extraction of otherwise economically unviable resources (Bakken shale, Alberta tar sands, the Orinoco heavy oil belt) profitable peak production is some way off, but that doesn't mean it's not going to happen.
The number of US rigs is higher now than at anytime in the past 14 years. Total US production has grown each of the last 3 years. ANWR would do nothing to change oil prices.
Without the strategic oil reserves, military action in the Middle East is pretty unthinkable.
We're in too tight with them, mullahs or no mullahs.
We do way more business with Iran than ever shows up in the headlines. There is only one
country in the world with whom they won't do business, and that's Israel. The Iranian island
resort of Kish is like one huge Hong Kong. Anyone and anything goes there, and that's by
design. You want to have some headlined talk with an Iranian official? Do it at the UN General
Assembly. You want it done in private with no TV cameras? Go to Kish. Know who has a house
there? Dick Fucking Cheney, that's who. You won't see that one in the Wall Street Journal. We
won't be attacking them except if the whole world network of communication channels breaks
down completely, or if AhmadiNejad manages to stage an internal coup and kills every single one
of the government guys who thinks he's nuts, and that's a lot of them.
And furthermore it's just an incredibly stupid thing to suggest in the first place; only someone with a very limited understanding of economics and the oil market could think it would make prices lower. If the US is exporting X number of barrels of gasoline per day, stopping those exports leaves the countries they were exported to needing to make up a deficit of X number of barrels per day, because THEIR demand for oil and gasoline hasn't declined. Where will they make that up? On the global market, increasing demand competition for the limited resources available and pushing the overall price UP. Which will make fuel prices in the US much higher, as well, because the US imports over half of the oil it uses.
If we vastly increased our production of CRUDE oil, then we could limit exports by law and get cheaper product in this country. It is the cost of crude that mostly causes prices to rise. But importing crude because we have refining capacity and then exporting product only helps the US economy. It does not lower the price of crude, though.
Here is the price of crude (refiner acquisition cost).
If refineries were exporting no fuel they would just process less, because the US just isn't using it:
The US would have to come up with an additional ten million barrels of oil, per day, to replace what's currently imported. US crude oil production peaked at 9.6 million barrels a day in 1970. It's currently at about 5.8 million barrels per day; US demand for oil is around 18-19 million barrels a day, of which about 4 million is supplied by refinery gains, natural gas liquids, and corn ethanol. The US doesn't have the oil resources to make up the deficit.
The price of crude in the US will remain regulated by the world market because we have to buy on the world market and so the aggregate cost of acquisition will remain high when the world cost of petroleum is high. If we don't refine domestically we buy a large portion of our refined fuel from external sources.
The original post elided the distinction between exporting entirely domestically produced fuel and exporting domestically refined fuel.
I was just making that clear.
which is how much we export, and the price is SURE to go down relative to the cost of oil per barrel.
You're taking that from the world market, and we're still left with a significant crude deficit from which we have no other choice but to import. You'd succeed in the further destabilization of the global market with the result being astronomically higher prices.
In the last decade, we've tripled the amount of refined product we export while decreasing the amount of crude oil we import.
Tell me how exporting less refined product will destabilize the world's crude oil market.
other countries will compete on the world market for other resources to meet their domestic demand which those exports of refined product are currently supplying. China or Brazil or whoever aren't going to stop using gasoline and diesel just because the US stops exporting it; they're going to look elsewhere. And that means increased market competition and higher overall prices for oil, because you've just taken close to 2 million barrels a day of gasoline and diesel out of the global market by not exporting.
The reduction in the amount of crude we import results in more crude on the world market and that amount continues to shrink with time.
Wouldn't that offset the amount of refined product we put ON the world market?
because the demand is clearly there for the exported refined product. Which means that you leave a deficit if you take that out of the world market that'd have to be made up by increased market competition. The demand increase from developing countries, principally China, India and Brazil, more than makes up for the c. 2 million barrels a day worth of decline in US demand from peak.
in that increased cost might become a motivation for movement away from refined petroleum products as a means of fueling transportation?
but it's also probably an inevitability given increasing global demand.
you have no opinion on whether the increase in the cost of refined petroleum is a good thing or not as it relates to motivation for moving away from fossil fuels as a means of fueling transportation of any kind?
Some of that fuel we export is used by other countries to ship goods BACK to us. Cut off supplies of fuel for the airplanes or ships that bring us goods from overseas, and you'll see import costs skyrocket.
In the long run this may be a good thing to spur more US manufacturing, but in the short run it would further cripple the US economy.