A diesel export ban would guarantee higher prices

Imagine you own a store that sells to a wide variety of customers, many of whom live outside your city. During a period of difficult economic conditions, the city council votes to allow sales only to city residents. Not to worry, they say, because with outsiders no longer competing for your products, a larger supply will be available for residents.

As a business owner, your costs stay the same, but your shelves remain stubbornly stocked as you can no longer sell products to your usual customer base. How long before you stop ordering products for sale, cut operating hours, lay off staff, and reduce investment in the business?

Yet these are the same sort of restrictions on the customer base of America’s refiners that Senate Majority Leader John Thune (R-S.D.) now says he is “open to considering.”

He is not alone. Retail diesel is sitting at a record $6.30 a gallon, and a diesel export ban is getting a serious hearing from people who should know better.

According to Sen. John Hoeven (R-N.D.), who has previously (and correctly) argued that lifting export bans would increase supply and lower prices, “Any ban would have to be done on a short-term basis, but it could ‘send a signal to the market’.”

Rep. Tim Burchett (R-Tenn.) went further, openly blaming “price gouging by greedy oil companies” for rising prices and urging Congress to “keep American diesel in America.”

The political impulse is understandable as American families are feeling the pinch of higher fuel prices. But the economics of an export ban remain hard to justify. Any ban might lower prices for a few weeks, but it would raise them for years because it’s based on flawed economic principles.

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