90-Day Diesel Export Ban Plan Faces Industry Backlash

The White House weighs a 90-day diesel export ban as U.S. prices near records; industry warns it could backfire.

President Donald Trump said Sunday the White House is still considering restricting diesel exports, telling Fox News "we're thinking about it very seriously" and warning that a ban "can oftentimes lead to a little bit of an increase on gasoline for cars." The new development is specificity: CNBC reports that Politico revealed last week the administration was preparing a plan to ban diesel exports for 90 days, while Energy Secretary Chris Wright has framed the option as restrictions rather than an outright ban. Trump had earlier promised a decision "one way or another" would come quickly. The shift from a trial balloon to a defined, time-boxed measure comes as retail diesel climbed to about $6.50 a gallon according to AAA, just below the record high of $6.53 set September 22.

The idea of the world's largest diesel exporter cutting off shipments has triggered immediate resistance from the U.S. energy industry. CNBC reports the American Petroleum Institute contested the prospect as soon as Trump first backed it, with API CEO Mike Sommers saying that "restricting U.S. energy exports would only compound the problem—exacerbating refining challenges and ultimately hurting consumers." Sommers argued the answer is "more supply and more flexibility—not new restrictions that risk making a difficult situation worse." The political surprise is that a measure aimed at easing prices for farmers and households ahead of the November midterms is being attacked as likely to raise them, by the very industry the administration relies on to expand supply.

Market strategists see the ban working only briefly, if at all. CNBC reports Morgan Stanley strategists wrote in a Thursday research note that a U.S. export restriction would likely lower U.S. diesel prices initially "but with potentially adverse reactions downstream," including higher global diesel prices and "a feedback loop to US gasoline prices as refinery runs adjust." CNBC also reports Argus Media's Benedict George said the U.S. has supplied about half of Europe's diesel imports in recent months, so any restriction would send European diesel prices and premiums against crude "to a new unprecedented level" — while stressing that no measure has been announced and European traders mostly doubt one will be.

The stakes extend well beyond U.S. pump prices. Supply disruptions from hostilities involving Iran, and the Russia-Ukraine war, have disrupted vital oil and fuel trade routes, and tippinsights notes those conflicts helped drive the price surge. CNBC reports Argus' George called Ukrainian attacks on Russian refineries the reason diesel is now "the biggest problem for the global oil system, whereas before it was one of several very big problems." George told CNBC the horizon on any U.S. restriction is short — "two or three months at an absolute most" — while the Russia-Ukraine conflict and the semi-closure of the Strait of Hormuz defy forecasting. Trump has urged Zelenskyy to stop targeting Russian refineries, saying the attacks are "hurting the world," but Ukraine views them as legitimate military targets.