The American people understandably are upset about high oil prices that have forced up the price of gasoline, straining family budgets and hurting struggling businesses.
The cost of crude oil that refiners must buy to manufacture fuels accounts for 76 cents of each dollar that American consumers spend on gasoline, according to the U.S. Energy Information Administration. Taxes account for another 12 cents, the refining industry gets another 6 cents, and distributors and marketers get the remaining 6 cents.
The best way to put downward pressure on the oil prices that are the main component of gasoline prices would be to tap into our abundant supply of oil by allowing increased production of oil in the United States and off our shores and by bringing more oil from Canada to U.S. refineries.
Unfortunately, President Obama is doing the opposite of what is needed to hold down the costs of oil and fuels. He is keeping vast amounts of federal land and waters off-limits to oil production; has blocked construction of the Keystone XL pipeline, which would bring the U.S. 700,000 barrels a day of oil from Canada; supports environmental overregulation that raises fuel manufacturing costs without benefiting the environment; and seeks tax increases on fossil fuels that also would raise costs.
Some politicians and pundits, including Bill O’Reilly of Fox News, are proposing a “solution” to the problem of high gasoline prices that actually would make it worse. They have called for a tax or other restrictions on fuel exports, arguing that this would cause gasoline prices to fall. They are wrong.
A big obstacle preventing an export tax from taking effect is the U.S. Constitution. A U.S. Supreme Court ruling in a 1998 case - United States Shoe Corp. v. United States - said export taxes violate Article 1, Section 9 of the Constitution, which states in part: “No Tax or Duty shall be laid on Articles exported from any State.”
But even if the Supreme Court had not found export taxes unconstitutional, imposing such taxes would be a bad idea because export taxes would damage our economy.
According to the U.S. Commerce Department, American exports total about $180 billion a month - nearly $2.2 trillion a year. If all those exports were halted, American factories and farms would have to make massive layoffs of their workers because they would lose the market for much of what they produce. This would be a disaster for the American economy and for American workers forced into unemployment.
No one is suggesting that U.S. auto companies be barred from exporting cars, that farmers be barred from exporting corn and other crops or that any other American industry be barred from exporting. It makes no sense to treat fuel exports any differently. Ending exports would cause American manufacturers and farms to produce less, not to lower prices.
Last year, America became a net exporter of manufactured petroleum products for the first time since 1949. Those exports injected $107 billion into the U.S. economy.
Fuel and petrochemical manufacturers are net exporters of a relatively small portion of our products. Gasoline does not even fall into this category because we import more gasoline than we export.
America exports virtually no crude oil. In fact, we are net importers of about 60 percent of the crude oil we need from nations around the world.
Our primary export is diesel fuel, which is manufactured along with gasoline and other products whenever crude oil is refined. It is impossible to turn the entire contents of a barrel of oil into gasoline.
What’s most important to understand is that there is no shortage of fuels in the United States. America’s petroleum refineries have more than enough capacity to meet consumer needs.
The poorly performing U.S. economy, increased vehicle fuel mileage and the federal requirement that we add renewable fuels like ethanol and biodiesel to the fuels we manufacture have combined to reduce demand for both gasoline and diesel.