A temporary U.S. ban on diesel exports could bring immediate relief at the pump, but Goldman Sachs warns that keeping the restrictions in place could eventually send domestic gasoline prices higher.
President Trump said Sunday that his administration was “very seriously” weighing a ban on diesel exports. Pressure to restrict exports of U.S.-refined diesel has intensified in recent weeks, largely among Republican lawmakers who view the move as a way to curb fuel costs. Diesel prices reached a record $6.53 per gallon on Sept. 22 before edging down to $6.45 on Monday, according to AAA.
Backers of the proposal point out that U.S. refiners produce more diesel than the domestic market consumes. The country therefore ships out roughly 1.5 million barrels a day in net diesel exports, according to S&P Global Energy. Cutting off those overseas sales, proponents argue, would send more fuel into the domestic market and lower prices for farmers, trucking firms and other diesel-dependent businesses.
How much would a diesel export ban lower prices?
Goldman Sachs estimates that an export ban could initially reduce diesel prices by about 25 cents per gallon, as long as refiners have room to store their unsold production. But once storage tanks fill, every additional week of restrictions could push gasoline prices up by roughly 30 cents per gallon, the investment bank said.
“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 wrote. “Therefore, downward pressure on diesel production can mean downward pressure on gasoline production, i.e. upward price pressure on gasoline.”
The White House did not immediately respond to a request for comment.
Industry experts say the initial diesel price decline would likely prompt U.S. energy companies to reduce overall refining activity. Because gasoline is produced alongside diesel, lower refinery output would also shrink gasoline supplies and put upward pressure on prices for American drivers.
The American Fuel & Petrochemical Manufacturers, which represents energy producers, warned Friday that blocking refiners from selling excess diesel abroad would lead them “to cut fuel production overall, including gasoline, putting upward pressure on prices and increasing America’s reliance on imported fuel.”
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Shifting the cost burden to gas
Wood Mackenzie, an energy consulting firm, likewise projects that a full diesel export ban could result in substantially higher gasoline prices for U.S. consumers.
“The irony of a U.S. diesel export ban is that it would likely increase costs for American consumers,” Alan Gelder, a Wood Mackenzie analyst, 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.”
JPMorgan analysts said the economics of refining diesel and gasoline would begin to deteriorate if an export ban lasted more than 30 days.
“Refiners can’t indefinitely produce excess supply. And since a refinery can’t simply stop making diesel while continuing to produce the same amount of gasoline, crude runs eventually would have to fall,” JPMorgan analysts wrote in a Sept. 24 report. “At this point, some of the initial price relief would begin to reverse — the opposite of what policymakers want.”
