re: We sent over 5 million barrels of oil from strategic reserve to Europe and Asia last month

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I was and still am against the export of oil, this reason is one that wasn't readily obvious, but I think shows we should have constraints.

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If we ban exports, we effectively cap US production. The goal should be to produce more oil than we use, not to pass laws that guarantee the opposite.

Once production nears consumption under an export ban, we start to run into a domestic glut. US crude oil starts to trade at a discount. That discount may sound good right now when oil is expensive, but it means the producers have all of the risk with capped reward. Over the long term, that capped upside is going to weaken the industry and negatively impact production growth. The only question is how much. But the reality is that if it’s not enough of a discount to affect investment decisions, it’s also not enough to make much meaningful impact on price at the pump.

US refiners get to buy that crude at a discount. If we ban crude oil exports without banning refined product exports (as things were prior to the crude export ban being lifted) then we effectively just decreased production margins while increasing refining margins (since refiners still get to trade in the global market). Except some of that margin doesn’t get transferred and is instead lost altogether because of the reduction in market efficiency. So the result is a net loss of profit margin for the overall US energy industry. Again this may seem like a good thing right now, but it would have depressed growth for the past 7 years when prices were low.

If we were to ban both crude oil and refined product exports, it would effectively eliminate any possibility of US energy independence as measured by any combination of refined product and crude oil production.

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Seeing refiners balking at expansions and builds just makes my original fear of offshoring refining more of a reality.

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Balking at expansions? Refinery capacities had been increasing at a pretty steady clip from the mid-late 90’s until 2020. COVID delayed many projects (both due to project execution issues and hesitance on investment decisions) but they are still spending money. If anything it seems like refineries and chemical plants are spending a crazy amount of money right now.

There are several major expansions ongoing right now (Exxon BLADE, Valero Port Arthur Coker, Marathon STAR project to name some big ones). Valero recently finished two new Alky units at the St. Charles and Houston refineries as well. One problem is that refiners (particularly Valero, but also others) have a ton of capital spending currently tied up in renewable diesel projects.

Regardless, refineries make expansion decisions based on their outlook on the crack spread over the next decade or more.. not the next year. Refineries don’t just respond to high margins by quickly adding capacity. It’s a prime example of why it’s important to make energy policy decisions based on a long term outlook and a desire for a strong, stable industry.