Trump considers diesel export ban as fuel prices surge

President Donald Trump says he is seriously considering a ban on U.S. diesel exports as prices hover near a record high. The proposal could lower diesel costs at first, but analysts warn that a prolonged ban could raise gasoline prices at home and fuel costs abroad.

The national average price of diesel reached a record $6.53 a gallon on Sept. 22 before easing to $6.45 on Monday, according to AAA figures cited by CBS News. The BBC reported that the price surge is tied to the ongoing U.S.-Israel war with Iran and tight global supplies. The conflict has restricted shipping through the Strait of Hormuz, a route that normally carries one-fifth of the world’s oil and gas, the BBC said.

Trump told reporters on Sunday that his administration was considering an export ban “very seriously.” The BBC reported that he had earlier called for the United States to “not send out the diesel” in remarks on the sidelines of the United Nations General Assembly. Supporters, including Republican Congresswoman Ashley Hinson and Senator Dan Sullivan, argue that keeping more American fuel at home would protect workers and businesses from rising costs, according to the BBC.

U.S. refineries produce roughly four million to five million barrels of diesel a day, while Americans consume about 3.6 million, according to Energy Information Administration figures cited by the BBC. The country exports roughly 1.2 million to 1.5 million barrels daily. Diesel powers freight trucks, farm equipment and cargo trains in the United States, making its price a factor in the cost of moving goods and producing food.

Goldman Sachs estimates that a ban could initially cut U.S. diesel prices by about 25 cents a gallon, CBS News reported. But that relief could last only while refiners have room to store fuel they can no longer export. Once storage fills, Goldman Sachs estimates that each additional week of a ban could push gasoline prices up by 30 cents a gallon.

“The longer a diesel export ban lasts, the more disruptive it would likely be,” Goldman Sachs analysts said, noting that diesel, gasoline and jet fuel are largely produced together. If refiners cut diesel output, they would also produce less gasoline. The American Fuel & Petrochemical Manufacturers trade group similarly warned, according to CBS News, that an export ban would lead refiners to cut overall fuel production and increase U.S. reliance on imported fuel.

Importing countries could face a separate shock. The BBC reported that 60% to 70% of U.S. diesel exports go to Latin America, including Mexico, Brazil, Chile and Ecuador, while significant volumes also go to Europe. UK Chancellor John Healey told the BBC that Britain was discussing a potential ban with U.S. authorities and preparing for it.

David Fyfe, chief economist at Argus Media, warned that cutting off U.S. supplies could send international prices sharply higher, “feeding inflation back into the global economy.” It would also damage the country’s standing as an energy supplier, he said: “At a stroke, the US’s reputation as a reliable supplier of energy to the world would be shot.”