US diesel prices have surged to record levels, putting more pressure on businesses that depend heavily on diesel for transportation, farming and other operations. The increase has come as the Iran war continues, disrupting global fuel markets and pushing up the cost of diesel.
The Trump administration is reportedly considering a 90-day ban on US diesel exports as one possible way to increase fuel supply inside the country. The reported plan was first detailed by Politico. If introduced within the next few days or weeks, the ban could remain in place roughly until the end of 2026, according to Yahoo Finance.
The basic idea behind the proposal is simple: keep more diesel in the US instead of sending it overseas. The administration hopes that putting more diesel into the domestic market would increase supply and eventually push US diesel prices lower. However, fuel experts and economists warn that the plan could have unexpected economic effects and may not solve the main reasons behind record diesel prices.
Tobin Marcus, head of US policy and politics at Wolfe Research, said Trump appears to want to respond to demands for relief. But Marcus also said the White House understands that an export ban could create unintended consequences, according to Yahoo Finance.
Why does Trump want to stop exports?
The theory behind the proposed ban is that less diesel leaving the US would mean more diesel available for Americans. More fuel inside the country could increase domestic supply and, in theory, put downward pressure on prices.
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One major concern is that an export ban could reduce the money US energy companies earn from selling diesel. Joe Brusuelas, chief economist at RSM US, said lower diesel prices caused by an export restriction could reduce revenues across the US energy industry, according to Yahoo Finance. If energy companies make less money, they could respond by cutting production.
US diesel is not evenly distributed
Another problem is that diesel is not produced and stored evenly across the US. A large share of US diesel production takes place along Louisiana’s Gulf Coast, which is the center of the country’s refining industry. At the same time, diesel shortages are developing in parts of the Northeast and West Coast.
This creates a transportation problem. Having more diesel on the Gulf Coast does not automatically mean there is enough diesel available in New York, California or other areas facing shortages. GasBuddy petroleum analyst Patrick de Haan said the US would have difficulty moving the extra fuel around the country, according to Yahoo Finance.
Pipelines moving fuel from the Gulf Coast are already operating at or close to full capacity. Because of this, additional fuel may need to be transported by water, which takes more time and adds transportation costs.
The biggest problem is the global oil market
Experts say the biggest challenge for Trump’s plan is that diesel prices are influenced by the global market, not just by how much diesel is available inside the US. US refiners decide where to sell their diesel based largely on the price they can receive in different markets. If overseas buyers are willing to pay more, US companies have a strong financial reason to export diesel.
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The Iran war has made this problem worse by disrupting fuel supplies from the Middle East. At the same time, Ukraine’s attacks on Russia’s refining industry have removed more refining capacity from the global market.
The US has tried export restrictions before
The US has used export restrictions during an earlier energy crisis. After the 1973-74 Arab oil embargo, gasoline prices jumped sharply and Americans faced long lines at gas stations. In response, Congress passed the Energy Policy and Conservation Act of 1975. The law directed the president to largely restrict exports of US-produced crude oil.
Research by the Brookings Institution and other groups later found that the restrictions did little to reduce the daily price pressure faced by Americans. The restrictions may also have encouraged US producers to reduce their output. The crude oil export restrictions were eventually repealed in 2015, after the US shale boom dramatically increased domestic oil production.
Samantha Gross, director of the Energy Security and Climate Initiative at Brookings, said price controls during an earlier period encouraged refiners to hold back gasoline rather than sell it immediately, because they could potentially sell it later at higher prices, according to Yahoo Finance.
A ban could increase the amount of diesel available domestically in the short term, but experts warn that production cuts, transportation problems and global fuel shortages could limit its impact. The Iran war and attacks on major refining infrastructure have also created supply problems outside the US, meaning a US export ban would not increase the amount of diesel available globally.