President Donald Trump is mulling over a potential diesel export ban. It's a proposal that's already stirring up strong warnings from the oil industry about how this could negatively affect global fuel prices. This idea has emerged as Trump feels the heat to tackle rising fuel costs before the November midterm elections.
At the United Nations General Assembly, Trump voiced his support for the idea of restricting diesel exports. "I've said let's not send out the diesel. We make a lot of diesel, " he remarked. But his comments have not gone down well with industry leaders. They're arguing that such a ban could actually make the current fuel crisis even worse.
The American Petroleum Institute (API), a powerful oil lobby group, has been quick to oppose the move. API CEO Mike Sommers has stressed that restricting U. S. energy exports would only add to the existing refining challenges and hurt consumers. "The answer is more supply and more flexibility—not new restrictions that risk making a difficult situation worse, " Sommers declared.
As reports surfaced about the Trump administration gearing up for a possible 90-day diesel export ban, shares of major U. S. refiners like Valero, Marathon Petroleum, and Phillips 66 took a hit. However, Energy Secretary Chris Wright suggested that the administration is considering restrictions rather than an outright ban, acknowledging the refinements' complexities.
Wright cautioned that an export ban could lead to immediate gasoline price hikes as refineries might cut production due to storage tanks reaching capacity. "If you start putting barriers on flows, pretty quickly you will reduce the production, and you'll have less supply, " he explained.
Industry experts are echoing these concerns. An oil executive informed CNBC that a diesel export ban might push fuel prices up by 30 cents per gallon. Patrick De Haan, head of petroleum analysis at GasBuddy, indicated that gasoline prices could climb to near-record levels if the ban takes effect.
Bob McNally, president of Rapidan Energy, observed that while an export ban might temporarily lower prices in areas with ample refining capacity, like the Gulf Coast and the lower Midwest, the Northeast wouldn't see much relief due to its dependence on imports. He warned that prices would eventually climb higher than if there had been no ban, with potential global consequences.
There's also worry about possible retaliation from U. S. trade partners. The U. S. exports diesel to Europe, which in turn sends gasoline to the U. S. McNally pointed out the risk of Europe halting gasoline exports to the U. S., a move that would especially impact the import-reliant Northeast.
Despite these warnings, the White House is feeling pressure from Republican lawmakers to enforce the export ban as diesel prices reach new highs. Senator Chuck Grassley of Iowa has called for an embargo to aid farmers in his state, where diesel is crucial for agricultural operations.
As of Wednesday, the national average price for diesel stood at $6.52 per gallon, nearly $3 more than the year before. McNally described the situation as "full-blown panic, " given the political stakes and the historical trend of rising diesel prices during election periods.
The administration's next steps are still up in the air. Treasury Secretary Scott Bessent noted that the White House is assessing the viability of a full or partial ban, taking into account the overall refining capacity. A White House official mentioned that Trump is weighing all options to bring down gas prices at the pump.
One factor contributing to the current high diesel prices is Russia's export ban, which was enacted in response to Ukraine's attacks on its refineries. This has removed a significant supply from the market, and a U. S. export ban would further strain global supplies.
McNally expressed skepticism about the proposed ban, noting widespread opposition, even within the administration.
