At first I thought this was just typical economically illiterate reporting:
The U.S. is now swimming in oil, thanks to the oil shale revolution that has turned places like North Dakota into the new Saudi Arabia. The U.S. still has a law on the books – passed during the oil shock of 1979 – that prohibits the export of crude oil, except to Canada and Mexico. The law, however, makes no mention of oil that has been refined into gasoline or diesel fuel. It's diesel fuel that is leading the petroleum export surge.
The profit margins are higher and the international demand is stronger for diesel than gasoline. Much of the world's automobile fleet runs on diesel. But a number of consumer advocates have wondered aloud in recent months whether this rush to sell refined petroleum products to the rest of the world hasn't hurt the U.S. consumer. If we have so much excess petroleum product, why aren't U.S. pump prices lower?
To be fair, the author (Mark Hoffman) says, "wait, it's not that simple."
But there is actually a broader issue. If the world price is above the domestic autarky price, it's always true that an open economy "hurts" domestic consumers, at least on that one commodity. So, my question is this: is participating in an open economy a voluntary act, by consumers? What about producers, when the world price is below the domestic autarky price? How are the property rights to access to global markets, or to foreclose access to global markets, distributed?
Don't say "politics," because that's true in every UNimportant respect. If you think property rights are important, who owns this right? If you think the answer is that no one can prevent someone else from engaging in a transaction, then how is that right to be enforced?
The U.S. is now swimming in oil, thanks to the oil shale revolution that has turned places like North Dakota into the new Saudi Arabia. The U.S. still has a law on the books – passed during the oil shock of 1979 – that prohibits the export of crude oil, except to Canada and Mexico. The law, however, makes no mention of oil that has been refined into gasoline or diesel fuel. It's diesel fuel that is leading the petroleum export surge.
The profit margins are higher and the international demand is stronger for diesel than gasoline. Much of the world's automobile fleet runs on diesel. But a number of consumer advocates have wondered aloud in recent months whether this rush to sell refined petroleum products to the rest of the world hasn't hurt the U.S. consumer. If we have so much excess petroleum product, why aren't U.S. pump prices lower?
To be fair, the author (Mark Hoffman) says, "wait, it's not that simple."
But there is actually a broader issue. If the world price is above the domestic autarky price, it's always true that an open economy "hurts" domestic consumers, at least on that one commodity. So, my question is this: is participating in an open economy a voluntary act, by consumers? What about producers, when the world price is below the domestic autarky price? How are the property rights to access to global markets, or to foreclose access to global markets, distributed?
Don't say "politics," because that's true in every UNimportant respect. If you think property rights are important, who owns this right? If you think the answer is that no one can prevent someone else from engaging in a transaction, then how is that right to be enforced?
On the question of participation in the global economy:
ReplyDeleteParticipating in a global economy may be voluntary, but not euvoluntary in that the gains to participation may be "too large" as compared to personal autarky. Right? Once you are old enough that the state won't track you down and throw you in school, you can in effect choose: get a job (and enter the world of specialization and exchange and mostly dependence on the global economy) or take a hike (obtain a piece of otherwise unclaimed land, catch and/or grow your food and shelter and pretty much DIY).
For a few people the disparity may not be large, but for must of us personal autarky would mean dieing cold, hungry and alone.
But the article omits a key current bit of data, the US still imports a great deal of crude oil. Millions of barrels a day. Some of this imported oil gets refined and exported elsewhere. Some of it is refined and used here. What consumers apparently hope for is some sort of hybrid in which refiners can import oil, but not sell refined exports.
ReplyDeleteThis isn't really about access to markets, but rather an inchoate attempt to grab at transitory infra-marginal quasi-rents.
The quasi-rents exist because oil imports are possible: the refineries are here, at current prices U.S. energy demand has moderated but growth occurs elsewhere, and so the refineries are using their otherwise excess/idle capacity to import and refine products for foreign markets.
Take away the ability to export refined products, then refineries stop importing so much fuel, and some refinery capacity is idled. True, in the short run domestic prices would likely fall a little. Over time refineries shed excess capacity and prices adjust.
In the process of blocking exports we would squeeze out excess refining capacity, meaning as (if?) the U.S. economy grows in the future we're constantly bumping up against the capacity limit. When you hit the limit, then scarcity pricing is needed to produce the economic profits needed to motivate capacity expansions. Therefore the policy gives us more volatile domestic energy prices, lower than otherwise sometimes and higher than otherwise sometimes. Likely prices which are on average higher than they would have been otherwise (but not more profitable for producers).
If I can't answer your property rights distribution question by saying "politics," then I'll answer by saying "culture." We tolerate a government that claims a monopoly right on territorial border enforcement, including regulation of cross-border trade, largely because we grow up thinking governments get to do that sort of thing. If fact, we mostly grow up thinking that a government that didn't regulate cross-border trade would soon cease to be an effective government at all.
ReplyDeleteIf you're not preserving the individual right to engage in a transaction, markets aren't euvoluntary.
ReplyDeleteSelling a good which you have not sold before (and there's always a first time), means entering a market, and, presumably, lowering the price of that good by competition. If we're not holding the individual right to transact sacred, all entrepreneurship produces uncompensated externalities against every entity already in the industry.