Analysis: US Gasoline Export Ban Will Reduce Supply, Raise Prices in Long Run
With the price at the gas pump poised to march above $4/gal once again on renewed Middle East hostilities, Washington might consider a gasoline export ban to bring down retail fuel prices. However, experts said any attempts by policymakers to disrupt market forces will fail and consumers will eventually pay higher prices as refiners produce less.
President Trump has blamed price gouging by Big Oil companies and called fuel retailers to drastically drop the gasoline price to around $2.50/gal — the level last seen at the start of the Covid pandemic in early 2020s. Rep. Ro Khanna, a California Democrat, introduced the “Gasoline Export Ban Act of 2026” in April to ban exports when the average U.S. price rises above $3.12/gal.
The White House has already taken steps of releasing record stockpiles in the Strategic Petroleum Reserve, granting Jones Act waivers to lower shipping costs in U.S. waters and allowing year-round E15 gasoline sales. While senior administration officials have in the past denied planning a gasoline export ban, it is another tool at the president’s discretion.
“Politicians often approach this from a simplistic angle that they would just somehow reduce the profits of a company, and the company should just be willing to deal with that. That’s not what happened because companies optimize in response to restrictions,” said Severin Borenstein, faculty director of UC Berkeley’s Energy Institute at Haas.
While domestic supply should in theory exceed demand and retail prices should drop after a U.S. gasoline ban, refiners will most likely switch production from gasoline to other refined products with higher profit margins, he said.
After the Nixon administration imposed a gasoline price ceiling in August 1971, refining companies responded by producing less, creating severe gasoline shortages and long lines at gas stations.
Borenstein said politicians often focus on ways to lower prices in days or weeks, while ignoring long-term market responses like refining margins and possible reduced crude supply as oil companies cut investments and produce less in response to a price decrease.
Philip Verleger, an oil market analyst who served as an energy advisor in the Ford and Carter administrations, estimates that U.S. gasoline production could fall by more than 1 million b/d if the price of gasoline falls to $2.50/gal.
Refiners will decrease gasoline supply because it is far more profitable to produce diesel than gasoline in current global market conditions, Verleger said.
Robert Kleinberg, adjunct senior research scholar at the Columbia University Center on Global Energy Policy, said it would be difficult to achieve the intended goal of an export ban on gasoline, whose price is largely determined by crude oil that is internationally priced and traded.
Kleinberg said it has been a win-win for sophisticated U.S. refineries to buy deeply discounted feedstocks like Western Canadian Select and Mexican Maya crude and turn them into profitable, high-value products for export. Also, the supply of oil from Canada and Mexico has improved U.S. energy security by relying less on oil imports from political adversaries further away, he said.
Geographical constraints could also render any export restrictions ineffective. The U.S. Gulf Coast accounts for 55% of the nation’s refining capacity and almost all U.S. gasoline exports. With virtually no incremental capacity to move fuel by pipelines or vessels, redirecting a large volume of products from the Gulf Coast to other parts of the U.S. is not feasible.
The American Fuel and Petrochemical Manufacturers in late June urged the Trump administration to waive the Renewable Fuel Standard, which the trade group said is adding an estimated 40cts/gal to gasoline and diesel prices.
The International Emergency Economic Powers Act of 1977 granted the president sweeping powers to regulate exports that can be applied to refined products. The president also has the power under the Defense Production Act of 1950 to direct refineries to prioritize production with some limitations.
Bethany Williams, a spokeswoman for the American Petroleum Institute, said the oil and gas industry shares the goal of providing relief at the gas pump and restoring stability to global energy markets.
“Gasoline prices don’t move in lockstep with crude oil, especially during a major global disruption that is still affecting supply, refining and inventories,” she said.
Reporting by Frank Tang, ftang@opisnet.com; Editing by Michael Kelly, mkelly@opisnet.com
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