Trump Weighs a Diesel Export Ban, but Goldman Warns It Could Push Gas Prices Higher
Diesel hit a record $6.53 a gallon last week. Analysts say a ban would cut diesel by about 25 cents at first, then raise gasoline 30 cents a gallon for every extra week once storage fills.
President Trump told reporters Sunday that his administration is "very seriously" considering a ban on diesel exports, a move meant to relieve record fuel prices that Wall Street analysts and the refining industry warn could backfire at the gasoline pump.
Diesel hit a record $6.53 a gallon on Sept. 22 and has eased only slightly since, to $6.45 on Monday, according to AAA. The price squeezes farmers, truckers and thousands of other businesses that run on the fuel. Calls to keep U.S.-refined diesel at home have grown in recent weeks, mostly from Republican lawmakers. A White House official told CBS News that the president is evaluating every available option to bring prices down but that no policy decision has been made.
The case for a ban is simple on paper. U.S. refiners make more diesel than Americans burn, leaving net exports of about 1.5 million barrels a day, according to S&P Global Energy. Stop those exports, the argument goes, and a flood of fresh supply at home would push prices down. Goldman Sachs estimated that a ban could indeed cut diesel by about 25 cents a gallon, but only while refiners still had room to store the surplus.
After that, the math turns. Once diesel storage is full, Goldman said, every additional week of a ban could raise gasoline prices by 30 cents a gallon. "The longer a diesel export ban lasts, the more disruptive it would likely be by putting upward pressure on gasoline prices because diesel, gasoline and jet fuel are largely produced together," the bank's analysts wrote. A refinery cannot simply stop making diesel while producing the same amount of gasoline, so less of one means less of the other.
JPMorgan analysts reached a similar conclusion in a Sept. 24 report, saying the economics would start to crack if a ban lasted more than 30 days. "Refiners can't indefinitely produce excess supply," they wrote. "At this point, some of the initial price relief would begin to reverse — the opposite of what policymakers want." Alan Gelder, an analyst at the consulting firm Wood Mackenzie, called it "the irony of a U.S. diesel export ban," saying cutting crude runs "would shift the cost burden from diesel to gasoline."
The refining industry's trade group, American Fuel & Petrochemical Manufacturers, warned Friday that blocking exports would force refiners "to cut fuel production overall, including gasoline, putting upward pressure on prices and increasing America's reliance on imported fuel."
The debate comes as energy costs dominate the political landscape weeks before the midterm elections. Fuel prices have climbed through the late summer as the war with Iran and disruption in the Strait of Hormuz have rattled oil markets, and the administration has been searching for levers it can pull quickly. An export ban would be one of the most aggressive, but the analysis from Goldman, JPMorgan and Wood Mackenzie suggests the relief could last weeks while the cost could fall on the far larger number of Americans who fill up with gasoline.
