Not long ago, Republicans were battling Democrats to repeal a decades-long prohibition on U.S. crude oil exports. Now in a political fix and in need of a quick one, President Trump and GOP lawmakers are pushing to ban diesel exports as pump prices shoot to record highs. The policy has cheap appeal ahead of the midterms, but it would wreak havoc on energy markets at home and abroad.
Global prices have spiked since fuel supplies were strangled this year by wars in the Middle East and Ukraine. Higher crude oil costs are primarily to blame, but diesel prices have risen even faster than gasoline because conflicts are hitting shipments of the former fuel especially hard.
American refiners produce more than enough diesel, currently exporting more than a quarter of their output to other countries. Proponents of an export ban theorize that, by closing off international sales, consumers would no longer have to bid against foreign buyers to fill up. Trapping surplus supply in the United States could further suppress costs, as refiners would have to cut prices to clear their inventories.
Lawmakers up for election, especially those from farm-heavy states, want to see prices drop before November — and they would rather halt refiners’ exports than ease costly biofuel blending mandates. Tinging the proposal is thoughtless nationalism. Remember when Republicans were boasting that America had become a net energy exporter?
If an export ban were implemented, diesel prices could indeed be held down, but only for some people and only for a short time. The United States does not have a perfectly unified diesel market; rather, it is limited by the physical constraints of pipelines already running at full capacity. Most excess diesel would be stuck near major refining hubs like the Gulf Coast, forcing prices down in some regions far more than others.
Some parts of the country, including the East and West Coast, remain dependent on diesel imports to meet demand. Banning U.S. exports would reduce global supply barrel for barrel, putting upward pressure on prices for those consumers. Foreign allies in Europe and Asia relying on American diesel to fill gaps caused by the Iran war would also be badly burned. One estimate has international prices as much as doubling if the world’s leading exporter shuts its borders.
To the extent that bottled-up diesel suppresses any domestic prices, it would incentivize refiners to slash their output. Without the infrastructure to transport massive amounts of additional diesel to domestic buyers, storage tanks would fill quickly. Diesel margins would be crushed, and production could even become unprofitable, since refiners would still have to pay elevated oil prices for the essential input.
Once refineries stall or redirect capacity and diesel output collapses, prices would go up again. Trump’s energy secretary, Chris Wright, warns that lower runs would also crimp gasoline and jet-fuel supply because different products are distilled from the same oil. Americans would be left with rising fuel costs after a brief reprieve, destroyed production and export revenues, and aggravated market chaos.
Controlling diesel prices would therefore require controlling the price of oil and other refined products, too, but the United States could not fully isolate itself from world energy markets if it wanted to. As long as the Strait of Hormuz remains snagged and other wartime disruptions continue, attempts to restrain any particular price are like pinching a water balloon. To reduce costs sustainably, tight global fuel supplies must be restored and expanded — not hoarded.