Washington D.C — The Trump administration is considering suspending diesel exports due to record high prices, but an extended ban on exports could lead to more expensive gas prices. President Trump and Republicans in Congress have expressed interest in the ban with the belief that this will help lower prices as diesel hits a record of $6.53 per gallon on Sept. 22 due to the war in Iran. This ban could ultimately hike prices by 30 cents per gallon.
An export ban is not a sustainable practice for the long-term issues at hand. American Fuel & Petrochemical Manufacturers have warned that this ban could “cut fuel production overall, including gasoline, putting upward pressure on prices and increasing America’s reliance on imported fuel.”
“This policy would only lead to more issues for Americans relying on gas and diesel for their everyday lives – especially farmers,” said Ryan Marquardt, a fifth generation farmer and the Vice President of the Iowa Farmers Union. “Farming is a business that relies on planning. We make buying and planting decisions months in advance. Instead of lowering costs, these economic policies have created further uncertainty for farmers and consumers alike.”
CBS News: Trump is eyeing an export ban on U.S. diesel. It could cause gas prices to soar, experts warn.
Key Points:
- A move by the U.S. to temporarily halt diesel exports amid record-high prices would initially lower costs, but a prolonged ban could drive up domestic gasoline prices, according to Goldman Sachs.
- President Trump on Sunday told reporters his administration is “very seriously” considering a ban on diesel exports.
- Calls to restrict exports of U.S.-refined diesel have picked up in recent weeks, mostly from Republican lawmakers, as a lever they believe will help lower prices. Diesel hit a record $6.53 a gallon on Sept. 22, and has only eased slightly since then, slipping to $6.45 a gallon on Monday, according to AAA data.
- Goldman Sachs estimated that a diesel export ban could cut prices by about 25 cents a gallon while refiners have storage space for their excess diesel production. However, once diesel storage reached capacity, each additional week a ban was in place could cause gas prices to jump by 30 cents per gallon, according to the investment bank.
- “The longer a diesel export ban lasts, the more disruptive it would likely be by putting upward pressure on gasoline prices because diesel, gasoline and jet fuel are largely produced together,” Goldman Sachs analysts said in the report. “Therefore, downward pressure on diesel production can mean downward pressure on gasoline production, i.e. upward price pressure on gasoline.”
- Although diesel prices would likely initially drop if an export ban were to be introduced, U.S. energy companies would respond by cutting their refining output, according to industry experts. Gasoline is refined alongside diesel, so a drop in production would also reduce gas supplies, driving up prices for U.S. consumers.
- American Fuel & Petrochemical Manufacturers, a trade group for energy producers, warned Friday that blocking refiners from exporting excess diesel supplies would cause them “to cut fuel production overall, including gasoline, putting upward pressure on prices and increasing America’s reliance on imported fuel.”
- Wood Mackenzie, an energy consulting company, also predicts that Americans could face sharply higher gas prices if the Trump administration implemented a full diesel export ban.
- “The irony of a U.S. diesel export ban is that it would likely increase costs for American consumers,” Alan Gelder, an analyst at Wood Mackenzie, said in a statement. “Cutting crude runs to manage the oversupply would shift the cost burden from diesel to gasoline, meaning a policy designed to bring relief at the diesel pump could end up driving prices higher at the gasoline pump.”
- If an export ban extended longer than 30 days, cracks would appear in the economics of refining diesel and gas, according to JPMorgan analysts.
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About Unrig Our Economy
Unrig Our Economy is a national campaign to fix the rules of our economy to make it work for working people. We know that when the middle class does well, all of us do well — which is why we’re fighting on behalf of working Americans and holding corporations, their wealthy executives, and the politicians who enable them accountable.