Trump's Last Resort: Diesel Export Ban Backfires

Escalation: Diesel Export Ban

President Donald Trump is still looking 'very seriously' at implementing a US ban on diesel exports to combat high prices, according to a recent report. But experts warn that such a move could backfire and affect gasoline prices.

As the world's largest oil producer, the US has emerged as the supplier of last resort, with diesel exports surging to a weekly record of nearly 2 million barrels a day in August, according to the Energy Information Administration (EIA). This trend is a result of the global energy market's shift towards the US, driven by factors such as the COVID-19 pandemic and the ongoing conflict in Ukraine.

The US has been exporting diesel at an unprecedented rate, with the majority of it going to Europe and Asia. A ban on diesel exports could raise prices elsewhere in the world, including a possible 40%-50% jump in European wholesale prices, as reported by Bloomberg. This could have far-reaching consequences for the global energy market and the economies of countries that rely heavily on diesel imports.

The Timeline

The US has been the world's supplier of last resort for several months now, with diesel exports surging to a weekly record of nearly 2 million barrels a day in August. However, a ban on diesel exports could raise prices elsewhere in the world, including a possible 40%-50% jump in European wholesale prices.

What The Filing Says

National Economic Council Director Kevin Hassett, Treasury Secretary Scott Bessent, and US Trade Representative Jamieson Greer have been analyzing the ramifications of a potential short-term ban on US diesel exports over the last week. Oil CEOs and industry groups have pushed instead for suspending the federal diesel excise tax, saying it would ease prices without the drawbacks of an export ban.

The Administration's Alternative

Energy Secretary Chris Wright said last week that the administration is working with refiners on voluntary export curbs as an alternative to a government-imposed ban. This move could provide immediate price relief in at least some regions of the US, with prices dropping roughly 30% within weeks.

The Potential Backlash

A ban on diesel exports could lead US refineries to cut output, making any US price relief a short-term affair. Moreover, the effects wouldn't be felt evenly across the US, with some regions experiencing more price relief than others.

The Global Impact

A US export ban could raise prices elsewhere in the world, including a possible 40%-50% jump in European wholesale prices. TotalEnergies has capped gasoline and diesel prices at its French service stations in a bid to assuage politicians and motorists.

The Next Development

Early voting in some states is set to begin next week, and the administration is scrambling for alternatives to combat high prices. However, the effects of a diesel export ban would be felt for months to come, and the administration must carefully weigh the pros and cons before making a decision.

Our Read:

The administration's decision on a diesel export ban will have far-reaching consequences for the energy market and the US economy. While a ban may provide short-term relief in the US, it could lead to higher prices elsewhere in the world, potentially harming the global economy. The administration must carefully consider the potential consequences of such a move and weigh the pros and cons before making a decision.

What to Watch:

The administration's next move on diesel exports will be closely watched by the energy market and the US economy. As the global energy market continues to shift, the US will likely remain a key player in the supply of diesel. The administration's decision on a diesel export ban will have significant implications for the energy market and the US economy, and it will be essential to monitor the situation closely in the coming weeks and months.