There’s a lot to love about buying gas at $2 a gallon. But thanks to powerful corporate interests, a 1970s ban on exporting oil, and the Jones Act, it’s likely gas won’t stay that way forever.

The Merchant Marine Act of 1920, also called the Jones Act, prohibits ships from sailing between US ports unless it is a US-made, US-crewed vessel.

The 1975 Energy Policy and Conservation Act prohibits the export of crude oil from the United States.

These two laws together have created a petri dish of potential problems in the current energy boom.

Right now, US energy companies are producing unprecedented amounts of crude oil. This extra supply is driving down the price of gas, which is great right? Well…

The problem is that they’re producing more crude oil than refineries can process. And they can’t ship the crude overseas. So there’s extra supply.

That extra supply means that they are probably going to cut back on the amount of oil they produce. If they do that, then supplies will dwindle and the price of gas will go back up.

If they could export that crude oil (which they can’t, because of the 1975 EPCA mentioned above), then they would keep booming, keep hiring and keep gas prices low. Instead, thanks to always-helpful government regulations, it’s likely we’ll see gas prices go back up.

However, if the export ban is repealed but nothing’s done to the Jones Act, it will be cheaper to ship crude overseas to refineries for processing than to ship to US refineries. So then US refineries are hurt — again, thanks to always-helpful government regulations.

So the scenarios are:

  1. The export ban and the Jones Act are repealed, meaning more US crude oil produced and refined in US refineries. WIN-WIN
  2. The export ban is repealed but not the Jones Act, meaning more US crude produced, but US refineries suffer because it’s cheaper to ship overseas. WIN-LOSE
  3. Neither the export ban nor the Jones Act are repealed, meaning massive layoffs for energy producers, less US crude oil produced and higher gas prices for us. LOSE-LOSE

Here’s how the Wall Street Journal lays it out:

“Oil is overflowing U.S. storage facilities partly because of the 40-year-old export ban. The wave of bankruptcies and layoffs that many have predicted for the U.S. energy sector may finally be coming, but less because of the distressed price of oil than because producers will have to stop producing if they have nowhere to send their output…

“By the estimate last year of the American Petroleum Institute, if the archaic export ban were lifted, the additional export opportunity would allow another 500,000 barrels a day to be produced, worth 300,000 jobs directly and indirectly…

“It costs $2 a barrel to ship Texas crude to Europe or Asia and $7 to ship it to Philadelphia. If the Jones Act were left in place but the export ban lifted, a great deal of U.S. oil would go to overseas refineries solely to take advantage of cheaper shipping rates.”

So there you have it: the always-helpful government regulations that could mean cheap gas is here for a limited time only.

Crazy right? That’s just the tip of the iceberg. Get more food for thought about how government regulations impact our lives on our Regulations page here.

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