Here’s a letter to the Wall Street Journal.
Editor:
Mike Sommers makes excellent arguments against banning diesel exports (“The Diesel Export Ban Folly,” Sept. 25). But he leaves one out. By shrinking the market that U.S. refiners serve, an export ban, which raises the likelihood of future bans, will cause refiners to invest less in capacity over time. Why build to serve the global market for an average of 365 days a year when your market in the future is likely to be global for an average of only, say, 300 days a year?
As capacity shrinks, the real long-run price of diesel and other petroleum products will rise. Even if the ban lowers diesel prices today, the cost of that price cut will be higher energy prices tomorrow and long into the future.
Doubters should consider a parallel. Suppose Sacramento, reacting to rising global wine prices, banned wine exports from California for 90 days. What would this ban do to winemakers’ incentives to plant vineyards and build wineries? Knowing that the government is likely to restrict their market again, winemakers would scale back, and Californians would pay more for wine over the long run.
The same is true of diesel.
Sincerely,
Donald J. Boudreaux
Professor of Economics
and
Martha and Nelson Getchell Chair for the Study of Free Market Capitalism at the Mercatus Center
George Mason University
Fairfax, VA 22030
