Big Oil Says Diesel Export Ban May Drive Fuel Prices Even Higher

Will they or won’t they? That is the combustible question. Politico reported Wednesday that the Trump administration is readying a plan to halt diesel exports from the US for 90 days in an effort to lower record energy prices. The White House called it “fake news.”

Just one day earlier, President Donald Trump said he supported the idea of a ban and Treasury Secretary Scott Bessent said its feasibility was being studied. But on Wednesday, the White House pointed to Energy Secretary Chris Wright, who, without offering specifics, told The Wall Street Journal the administration may restrict exports, but won’t ban them outright. 

Fuel for Thought

Diesel prices have been driven to all-time highs since the start of the Iran war in February and by Ukraine’s recent attacks on Russian refineries. An average gallon of diesel in the US cost a record $6.52 on Wednesday, up from $3.69 one year ago, according to AAA. Farmers and truckers, who rely on diesel in their daily work, are feeling the immediate pain, but that could soon spread. JPMorgan Wealth Management cautioned investors in a report earlier this month that current diesel prices, by driving up shipping, logistics, construction and manufacturing costs, could force companies to choose between lower profits, charging more or cutting costs, ultimately hurting their stock prices.

The American Petroleum Institute, an industry trade group, warned that a ban would “wreak havoc at home and abroad” because diesel is traded globally and US prices track international supply and demand. If the 1.5 million barrels of US diesel traded every day, about 20% of global seaborne supply, were taken off the market, the institute said it “would exacerbate the very global refining crisis that is increasing prices here in the US.” Others agree:

• At home, Garrett Golding, an assistant vice president for energy at the Federal Reserve Bank of Dallas, wrote on X that a diesel export ban would bring down US prices temporarily. Then, domestic refineries would run out of storage and be forced to reduce their run rate, leading to higher gas and other fuel prices. 
• Abroad, one need look no further than import-dependent Europe: Already facing an acute diesel supply crunch, the continent’s diesel benchmark is up 135% this year. 

It’s a Gas: Investment adviser Vanguard said Wednesday that gasoline prices are a significantly more pronounced driver of inflation than diesel: “While diesel prices have risen by nearly 35% since end-June, compared with 16% for gasoline, our analysis indicates that gasoline accounts for more than half of the variability in headline inflation, compared with only around 3% for diesel.”