What is this White House Thinking?

Trade groups working in the U.S. energy sector doubled down on their criticism of suggestions the federal government is mulling a ban on exports of crude oil and refined petroleum products.

The Biden administration formally called on the U.S. Department of Energy to examine what impact a ban on exports would have on fuel prices. "A person familiar with the matter" told?Bloomberg?the White House was particularly concerned about a spike in retail gasoline prices ahead of the November elections.

The call is for analysis of the impact on prices if exports were limited over a short-term period of between 30 and 60 days, the report suggested.

Retail gasoline prices are one of the more obvious signs of rampant inflation in the U.S. economy. Crude oil prices account for the bulk of what consumers see at the pump and, with the Organization of the Petroleum Exporting Countries (OPEC) and their allies, a group known as OPEC+, cutting a staggering 2 million barrels per day from their collective output come November, those prices are set to spike in the coming months.

The White House insists that the domestic economy, however, needs to be less dependent on foreign producers for the sake of energy security. But a limit on U.S. exports at a time of growing market tightness seems counterintuitive.

"Banning or limiting the export of refined products would likely decrease inventory levels, reduce domestic refining capacity, put upward pressure on consumer fuel prices, and alienate U.S. allies during a time of war," Mike Sommers, the chief executive officer of the American Petroleum Institute, and Chet Thomson, the head of the American Fuel and Petrochemical Manufacturers trade group, said in a joint letter to U.S. Energy Secretary Jennifer Granholm.

Limits on exports would strike a major blow to the economies of Europe, given their pursuit of supplies of crude oil and refined petroleum products from some place other than Russia. The spike in commodity prices has put pressure on most major economies, and any further strains would almost certainly push the world closer to a major recession.

Members of the European Union will place a moratorium on Russia crude oil imports come December, and they plan to pursue a similar strategy with refined petroleum products in early 2023. As such, the European economy may be in for a rough couple of months, and it seems like the U.S. will not be the market savior that some expected.

Several media outlets this week have reported the White House views any major cuts from OPEC as a hostile act.

"We are not members of OPEC+, and so I don't want to get ahead of what could potentially come out of that meeting," White House press secretary Karine Jean-Pierre said Monday. But the U.S. focus is to "ensure markets are sufficiently supplied to meet demand for a growing global economy."

With elections looming, the White House is in a bind, as no single market player can influence global commodity prices without some sort of extraordinary intervention, such as a price cap. But given the U.S. economy is composed of private, not state-run, entities, there's really not much it can do apart from what it's already doing.

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