Diesel, the most critical fuel globally, has reached such high prices that certain Republicans are urging President Donald Trump to halt its exportation to allies and partners. “High diesel prices ARE KILLING FARMERS INCOME,” Republican Sen. Chuck Grassley posted on X last week, calling for an “embargo on diesel exports.” Rep. Tim Burchett, a Republican from Tennessee, addressed the House floor last week, accompanied by a billboard stating that diesel prices are “out of control,” to propose legislation aimed at banning diesel exports. Even Louisiana Governor Jeff Landry, whose state hosts some of the largest oil refineries globally, has advocated for a 90-day suspension of diesel exports from the United States. Banning US diesel exports could appear to be an appealing strategy for Trump to demonstrate his commitment to addressing the unprecedented diesel prices that are contributing to rising expenses for American consumers. And Trump may just do it, telling reporters on Tuesday, “I’ve said let’s not send out the diesel.” And “We make a lot of diesel,” Trump said at the UN General Assembly. “I’ve called for (halting exports) within my people. I’ve been talking about it.”
However, researchers caution that an export ban would likely offer only a short-term relief from elevated diesel prices and could prove counterproductive in the medium to long term. It has been asserted that a ban would probably lead to increased prices for friends and allies, elevate petrol prices, undermine US refiners and harm America’s standing as a dependable energy superpower. “This is taking a sledgehammer to the problem,” said Bob McNally. “It would be an authentic policy error, or what I call an ‘APE.’ In fact, this would be the king of the APEs.” The price of diesel – the workhorse fuel that powers the trucks, trains, tractors and ships at the heart of the modern economy – spiked above $6.50 a gallon over the weekend for the first time on record. It is merely a few cents shy of reaching the highest inflation-adjusted price observed since 2008. Diesel prices have surged 83% so far this year, positioning themselves for what would undoubtedly be the largest annual increase since AAA began monitoring diesel prices in 2000.
Prices have surged dramatically as a result of a detrimental combination of factors: The conflict in Iran has disrupted diesel exports from the Middle East, a critical area for diesel supply. Ukrainian drone strikes have incapacitated a number of refineries in Russia, which holds the position of the world’s second-largest diesel exporter. In addition to this, both Russia and China have enacted export restrictions. Despite Trump’s comments on Tuesday, a White House official informed on Monday that the administration is currently not contemplating an export ban or any export restrictions. Interior Secretary Doug Burgum told this month that he’s “not at all confident” an export ban would actually lower prices and cautioned it could “actually hurt Americans” in places dependent on imports. Still, McNally expressed his belief that there exists a considerable likelihood that the Trump administration may be “tempted” to impose export restrictions in response to elevated prices. A diesel export ban could prove to be quite effective in reducing prices – at least in the short term. However, that relief would not be uniformly experienced. McNally indicated that diesel prices might decrease by several cents per gallon in the Gulf Coast and the Midwest, as an export ban would confine diesel production within those areas.
However, the East Coast and West Coast may face abrupt price increases due to their dependence on imports and limited access to fuel from the Gulf Coast. “If he bans exports, the coasts are screwed,” McNally said. Where does US diesel go? Global diesel prices could skyrocket – hurting US customers in Europe and Latin America. Garrett Golding, assistant vice president at the Federal Reserve Bank of Dallas, stated in a post on X on Monday that the rising global prices for diesel “will boomerang back” onto the East Coast and, to a lesser extent, the West Coast. In essence, one cannot assume that a US export ban will necessarily lead to a decrease in the national price of diesel, as significant reductions in Texas may be counterbalanced by increases in New York. However, it is challenging to assert with precision how this situation would unfold. Andy Lipow expressed his belief that the coasts could endure the storm with the assistance of Jones Act waivers, permitting US vessels to transport fuel from the Gulf Coast. However, the fundamental issue lies in what follows. For months, US refiners have remained the sole survivors in the global refining shortage precipitated by conflict and export limitations.
However, if Washington were to abruptly restrict refiners from selling to international customers, it would be reasonable to expect a reduction in the volume of crude they process into fuel. That, in turn, would likely result in elevated prices and a diminished supply of all fuels – encompassing not only diesel but also jet fuel and petrol. “The price of gasoline could soar,” Lipow said. “Do not ban diesel exports. You will have a whole rash of unintended consequences.” One significant uncertainty is the reaction of US allies that depend on diesel to fuel their local economies. However, it is apparent that certain nations may consider retaliatory measures by restricting the supply of essential resources required by the United States. “The United States is the world’s biggest diesel exporter. Imagine the panic for the world’s most important fuel if the US bans exports. You would have a scramble,” McNally said. Tellingly, the initiative to prohibit US diesel exports has progressed to a stage where the oil industry has opted to engage directly in the discourse. Mike Sommers, CEO of the American Petroleum Institute, cautioned in a post on X this week that an export ban would “make the problem worse, not better – for consumers, farmers and the broader US economy.” Refiners have experienced significant growth this year, driven by unprecedented margins for converting oil into diesel. However, an export ban could exert significant pressure on the industry by prompting refiners to reduce production levels. “Some refiners may not survive,” Lipow said.
Ironically, that would represent a stark contrast to the assertions made by the White House regarding Trump’s intentions. Following discussions with refining executives, a White House official indicated that Trump and his team will endorse initiatives aimed at reopening closed refineries, increasing the capacity of current refineries, and building new facilities. However, a significant new oil refinery has not been constructed in the United States since 1977 – and prohibiting diesel exports might be the least effective method to persuade the industry that now is the opportune moment to invest billions in building a new facility. Gregory Brew remarked that the export ban discussion is “reflective of the very uncomfortable dynamic this administration is trapped in.” And “They are attempting a high-stakes game of chicken with the Islamic Republic of Iran and Iran’s almost entire strategy is built around exerting pressure on the US through energy prices,” Brew said. Researchers argue that the most effective method to reduce domestic energy prices is to conclude the conflict in Iran, rather than imposing restrictions on exports. “Unless they are prepared to make a deal with Iran, they don’t have good options for lowering prices,” Brew said.
