The oil industry is aggressively pushing back on a potential ban on diesel exports in attempts to bring down record costs for the fuel.
The oil industry is aggressively pushing back on a potential ban on diesel exports in an attempt to bring down record costs for the fuel, warning it would backfire and worsen the global energy crunch.
The Trump administration is facing mounting pressure to lower costs for gasoline and diesel that have become a painful pinch point for consumers and risk ramping up inflation again. Those political pressures are prompting lawmakers to search for answers on how to lower fuel costs, with little progress being made in ending the war with Iran or restoring traffic in the Strait of Hormuz.
Diesel prices have repeatedly hit record highs over the last several weeks with supplies being pinched by the war in Iran, damage to refineries in the Middle East and the targeting of Russian energy sites in its war with Ukraine. The national average for a gallon of diesel was $6.51 as of Thursday, nearly $3 more expensive than a year ago, according to AAA.
Consequences of expensive diesel spread throughout the economy, powering trucks and ships to move goods, raising the cost of harvesting crops and leading to more expensive prices for consumers.
High diesel prices have become a political liability for Trump and congressional Republicans for the midterms as races have tightened as costs have climbed, particularly in reliably GOP-leaning states with economies powered by diesel like Iowa, Kansas and Ohio.
Mounting pressures are leaving Republicans in search of ways to provide some immediate relief, with a growing number of them pushing to suspend fuel taxes or backing a diesel export ban in a bid to lower prices. In Louisiana, Gov. Jeff Landry declared a state of emergency allowing a type of diesel typically used for off-road vehicles to be used in other heavy machinery. Trump said earlier this week that he has called for a ban on diesel exports and that it was under review.
“I’ve said let’s not send out the diesel. We make a lot of diesel,” Trump said Tuesday at the United Nations General Assembly. “I’ve called for it within my people. I’ve been talking about it.”
But other administration officials have said the president was not endorsing a total ban and voiced concerns that limiting America’s exports would put pressure on fuel prices. Energy Secretary Chris Wright has said a “blanket ban” will not happen and that the administration was exploring voluntary restrictions.
"The blunt tool of banning diesel exports definitely doesn't work," Wright said at an event hosted by the Economist.
The oil and refining industries have also pushed back aggressively against any suggestions of an export ban. A letter signed by dozens of industry and business groups urged the Trump administration to reject an export ban, arguing it would ultimately increase costs.
“You have been asked by some to ban or limit the export of diesel to help lower prices, when in fact the opposite would occur,” the letter says.
U.S. refineries make far more diesel than the country needs for domestic use and diesel and gasoline are made in a partially combined process. If refineries could no longer sell their excess fuel abroad, they would likely cut down production to avoid storing excess product. Making less diesel would also mean producing less gasoline and jet fuel, which would add to the supply crunch and send prices higher.
The global shortage of diesel has pushed American producers to export record levels of diesel with refineries running near full capacity. The U.S. has exported as much as 1.6 million barrels a day, compared to 1.1 million before the war, according to the U.S. Energy Information Administration. But record U.S. production has not been enough to offset price pressures from the strait backlog and damage to refineries in Russia and the Middle East.
“Every part of the tariffs war, every part of the trade war, every part of the U.S. attack on Iran has got consequences in other parts of the economy,” said Ed Hirs, an energy fellow at the University of Houston.
Industry analysts and economists have warned a blanket ban on diesel exports may provide short-term relief on diesel, but those benefits would quickly fade if refiners responded by cutting production, making jet fuel and more expensive diesel in the long run.
“It's remarkable that that for the value that's created by gasoline, jet fuel and diesel, that the government is actually considering a policy to damage these industries,” Hirs said. “The right thing to do is to let the market adjust without interfering in the free market response to the trade war and to the to the U.S. war on Iran.”
While gas prices are not currently near record highs nationally, they are well above pre-war levels and have been a painful and unavoidable pinch point on household budgets. Analysts warn that a restriction on diesel bans would certainly lead to a significant acceleration in gasoline prices.
“If diesel exports get banned, gas prices could rise toward record levels,” Patrick De Haan, head of petroleum analysis for GasBuddy, wrote on social media.
