House Democrats call on Biden to ban oil exports and tap emergency reserves

They called the matter an “urgent problem” and called on House Democrats led by California Representative Ro Khanna to Biden to provide “affordable and reliable energy for American families.”

“We must use all available means to lower gas prices in the near term,” reads the letter, which 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.

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

Biden hopes to announce his decision to release oil from the SPR in an economic speech on Tuesday, officials told CNN. However, the timing of such a move depends on the other countries finalizing their agreements to do the same, officials said.
The specter of the United States, and possibly other countries releasing emergency barrels, has already helped drive oil prices down. After passing $85 a barrel at the end of October, US oil prices have fallen about 10%. That, in turn, has helped to halt rising gasoline prices. The national average is $3.41 per gallon, about the same as a week ago, according to AAA.

“Our primary responsibility is how we can reduce costs for working-class Americans,” Khanna told CNN in a telephone interview. “This is something that people are angry about. We need to address that concern.”

However, even proponents of tapping the SPR recognize that this is not a long-term solution. It’s more of a band-aid.

That’s because there is a finite amount of oil in emergency reserves. And barrel releases won’t resolve the underlying supply-demand imbalance caused by rising demand during the economic recovery and subdued supply from OPEC, the United States and other major producers.

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

Would an export ban help – or hurt?

But House Democrats suggest Biden should seriously consider the more dramatic move to ban oil exports — although multiple industry experts have warned such a move could backfire for American consumers.

“A ban on US crude exports will boost domestic supply and put downward pressure on prices for US households,” the House Democrats letter said.

This idea has reached the highest levels of the Biden administration. White House chief of staff Ron Klain worried the skyrocketing costs so much that he proposed taking the dramatic step of halting US oil exports to cut costs, an official told CNN. Government officials believe they can reach an agreement on a coordinated release that would not require an export ban.

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

That’s because oil is a globally traded commodity and US gas prices are determined by Brent, the global benchmark. If the world were to lose access to US barrels, Brent prices would likely rise due to less supply.

And U.S. oil refineries can’t rely solely on domestic oil to produce the diesel, jet fuel and gasoline the economy relies on. Refineries mix American oil with foreign barrels to produce these products.

Khanna questioned the analysis by industry experts, arguing that they could be contradictory in their warning against oil export bans.

But even Mark Zandi, an economist often cited 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 it will cut gasoline prices significantly as the price of gas is largely driven by global oil prices and not the price of domestically produced oil. It is also unclear whether domestic refineries would be able to produce the type of oil that US exports.”

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