A debate appears to be brewing in the Trump administration over the scope of a federal ban. Energy Secretary Chris Wright has said he supports a voluntary export ban instead of a mandatory one since across-the-board restrictions could trigger the higher prices the administration wants to avoid.
“We’re trying to avoid a blunt hammer of a government policy, understanding the complexity of refining,” Wright told the Wall Street Journal last week.
Republican lawmakers from predominantly farm states have repeatedly lobbied the Trump administration to implement an export ban on diesel. Many Republicans are anxious of receiving backlash from voters that could cost them control of the House, Senate or both in the midterms.
“American fuel should stay home with Americans,” Sen. Dan Sullivan of Alaska said in a Sept. 22 press release. The cost of diesel is just too damn high.”
How a diesel export ban could play out
Diesel is the typical fuel used by heavy freight vehicles and ships that transport food, furniture, and other commercial products to their destination. Farm and construction equipment rely on diesel as well. The US currently produces 5.3 million barrels of distillate fuel each day, which includes diesel, per the Energy Information Administration.
Diesel’s national average is $6.45 per gallon as of Monday, according to AAA, just below the $6.52 all-time high that was recorded a week ago. Diesel prices have shot up over 70% since the start of the Iran War, the effect of a collapse in steady diesel supplies flowing from the Middle East and to a lesser extent, Russia.
Goldman Sachs analysts recently mapped out how a diesel export ban could filter through to gas prices. At first, diesel prices could fall by 25 cents per gallon each week while storage space is available. But that won’t be the case for long.
Once diesel storage facilities are close to max capacity, diesel production drops with a corresponding increase to gas prices since both fuels are produced in the same refining facilities. Then, US refiners are incentivized to cut fuel production to accommodate shrinking storage space for diesel. Goldman Sachs analysts then project a 30-cent weekly increase to retail gasoline prices due to the lack of diesel storage capacity available.
‘Compound the problem’
Trade associations for the oil sector are pushing back against a possible diesel export ban, arguing it will backfire.
“We understand the administration is looking at every option to deliver relief, but restricting U.S. energy exports would only compound the problem—exacerbating refining challenges and ultimately hurting consumers,” American Petroleum Institute President Mike Sommers said in a statement last week. “The answer is more supply and more flexibility — not new restrictions that risk making a difficult situation worse.”
A diesel export ban is still in play. Whether it comes to fruition will likely rest on the Trump administration’s appetite to manage the fallout with energy companies and the public if prices spike in the long run.
Joseph Zeballos-Roig is a policy and politics journalist based in Washington D.C with a focus on economics. He is experienced in connecting the significance of events in the capital to the lives of everyday Americans whether its taxes, tariffs, interest rates or federal programs.
