Overall, Gasoline Exports net loss
for economic productivity
The gasoline market is well supplied, but if it weren`t for
gasoline exports, the united states would have much cheaper gasoline, and the
economy would reap the benefits of cheaper inputs which would fuel greater
growth in the US. For example, I imagine college students, truck drivers and
small business owners would be much more profitable paying a dollar less per
gallon for gas over a year`s time.
The refiners along the gulf coast have a strategic advantage
in using the WTI oil input price, making refined products, and then selling
them based upon globally benchmarked Brent Oil inputs. So quite the incentive
to export as much refined products as possible with these attractive margins.
Consumers vs. Corporations
As with most transactions there are winners and losers, and
US consumers are the big loser while refiners and the corporations that own
them are the big winners. In short, the US consumer is subsidizing the refiners’
profit margins.
Further Reading - After the Election, Obama Does Not Care About High Gas Prices
LNG Export Debate
It is ironic that another industry the Petrochemical
Industry is lobbying heavily against LNG exports, saying that they could
contribute to raising natural gas prices, which they use as a feedstock, and
this would hurt their profitability and operating margins.
Dow Chemical Company has been a vocal critic of ramping up
LNG exports, and Exxon Corporation has been on the other side of this issue.
Exxon would benefit from higher natural gas prices due to their increased
presence in natural gas over the last decade, and Dow Chemical who has moved
operations to the US to take advantage of cheaper input costs would be hurt by
rising natural gas prices.
Consumers Need Voice in Washington
I guess it is too bad consumers don`t have a large advocate
group in Washington looking out for their interests when it comes to gasoline
exports unlike the powerful fortune 500 companies. It is obvious that congressional
loyalties go to the powerful lobbyist groups representing large highly
profitable corporations, and not to consumers who elect these individuals into
office.
When in doubt always follow the money, and US consumers are
not organized on issues that affect them, and they lack the money to influence
politicians on issues that affect their bottom line.
Salt in the Wound
If that wasn`t depressing enough for US consumers, here is a
little salt to rub into that wound. If the US wasn`t exporting so much gasoline
and refined products it is obvious that given the lack of demand, the abundance
of oil, the sizable refining capacity, and the need to generate revenue,
gasoline and refined products would be much cheaper in the US. If you don`t
believe me, ask the experts in Dow Chemical why they are fighting LNG exports
so vigorously?
Venezuelan Subsidies
Here is the salt, Venezuela whose government under President
Hugo Chávez subsidizes gasoline for their citizens, so Venezuelans pay in the
neighborhood of 18 cents a gallon, and much of this gasoline comes from the US
in the form of exports. For example, U.S. exports of gasoline to Venezuela
climbed to a record high of 85,000 barrels a day in November of 2012, and total
petroleum products are well over 200,000 barrels per day of refined products
being imported from US refinery operators.
No Incentives
Ergo, the US has a tighter than otherwise refined products
market due to increased exports to countries like Venezuela, so US citizens pay
higher prices for the illusion of a tighter end products market, and Venezuelans
who have no incentive to use fuel efficiently due to below market subsidies,
demand more and more exports from the US, raising fuel costs on US consumers,
while they pay ridiculously low consumption prices.
What do US Consumers get out of
Exporting Gasoline to South America?
Furthermore, Venezuela is a country with leadership via
Chavez who routinely bad mouths the US, and nationalized the entire Oil
industry in Venezuela, and has neglected to properly upgrade their oil and
refining infrastructure.
Why should US citizens be subsidizing big oil refiners, and
in the process subsidizing Chavez`s inefficient use of energy, when these
resources could be better used at home.
Let Chavez procure all his refined products from China, it
would raise his costs enormously, and he would have to modernize his oil
operations thus boosting efficiencies, given the higher costs of importing
refined products from China.
What`s in it for the US, besides higher profits for US
refiners? It isn`t good for US consumers, or our political interests in the
region. The sooner the Chavez regime is forced by market forces to embrace
capitalistic ideas the faster the economy in Venezuela starts to use energy
more responsibly and efficiently.
In fact, if Venezuela had their act together given their
cheap input oil cost structure, provided they upgrade their infrastructure, the
US should be importing gasoline and refined products from Venezuela at much
lower costs than products cost today. The Adam Smith argument for maximizing global
economic goods and services through country specific efficiencies and scale is
underlying my assertion here.
Exports shouldn`t sacrifice US
Consumers in the process
I am all for exporting, but not at the expense of our own
citizens, and not for the purpose of subsidizing inefficient uses of energy,
and governmental policies worse than our own, and we are pretty bad on a lot of
governmental policy fronts.
The US should be encouraging Venezuela which is sitting on
the second largest supply of proven oil reserves, to enable free market forces
to come in and maximize those resources, so the world can benefit from cheaper
energy.
The last thing the US should be doing is helping subsidize Venezuelan
socialism through cheaper refined products at the expense of US citizens than
they could otherwise get from China or other parts of the globe. It’s just bad
policy all the way around unless you’re a US refinery along the gulf coast!
Yes, 18 Cents a Gallon
The next time your filling up at the pump for $4 a gallon
just take solace in the fact that Venezuelans are paying 18 cents a gallon, too
bad Dow Chemical hasn`t represented your interests on this issue in the past!
Further Reading - Delta Airlines Got An Oil Refinery: The Math Does Not Work
Further Reading - Delta Airlines Got An Oil Refinery: The Math Does Not Work
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