Video | The U.S. is a net oil exporter yet still suppresses oil price increases - what's the reason?

Question: How does rising oil prices affect ordinary American households?

The conflict between the US, Israel, and Iran has caused a crisis in international energy supplies, leading to a sharp increase in oil prices. Recently, the US has taken several measures to curb the rise in oil prices, such as temporarily easing restrictions on Venezuelan and Russian oil exports, suspending the implementation of the Jones Act for 60 days, and lifting shipping restrictions at domestic ports. The US is now a net oil exporter, so rising oil prices should be beneficial to it. Why then are these measures still being taken?

International oil price increases are more harmful than beneficial to the US economy overall

Wang Yongzhong, Researcher at the Institute of World Economics and Politics, Chinese Academy of Social Sciences: The main reasons the US restricts oil prices are fourfold. First, rising oil prices benefit the US energy sector, while American consumers and industrial sectors are harmed. Since the industrial sector and consumers are far more important to the US than the energy sector, overall, rising oil prices are more harmful than beneficial to the US.

Rising oil prices drive inflation, impacting the US economy and employment

Wang Yongzhong: Second, the US is a “car country,” so US gasoline and diesel prices are directly linked to international crude oil prices. When international oil prices rise, US refined product prices increase, pushing up the Consumer Price Index (CPI). Higher CPI then limits the Federal Reserve’s ability to cut interest rates. Delays in rate cuts can negatively affect the US stock market, economic growth, and employment, which in turn could reduce the Republican Party’s chances of winning future midterm elections.

Mismatch between US refining capacity and demand requires imports

Wang Yongzhong: Third, there is a mismatch between US oil production and refining capacity. The US mainly produces medium-quality oil, but exports light oil. Therefore, the US still needs to import large quantities of medium and heavy oils to meet its domestic refining needs.

The US needs stable oil prices to maintain the stability of its alliance system

Wang Yongzhong: Fourth, many US allies, such as European countries and Asian nations like Japan and South Korea, are highly dependent on oil imports. Rising international oil prices pose serious energy supply security issues for them. Consequently, higher oil prices weaken these allies’ support for the US and Israel in their stance against Iran.