President Trump says the White House is still weighing a ban on U.S. diesel exports as domestic fuel prices sit near record highs ahead of November's midterm elections. Analysts warn the move could cut U.S. diesel prices in the short term but push global diesel prices higher and squeeze Europe, which relies heavily on U.S. supply.
President Donald Trump said the White House is still weighing a ban on U.S. diesel exports, as he faces pressure to bring down fuel prices before the midterm elections in November. According to CNBC: "We're thinking about it very seriously", Trump told a Fox News reporter on Sunday at the Presidents Cup golf tournament in Illinois. He added that a ban could raise gasoline prices for cars, but said the administration may do it.
U.S. Energy Secretary Chris Wright has said the White House is considering restrictions rather than an outright ban, while Politico reported the administration was preparing a plan to ban diesel exports for 90 days. Average U.S. diesel prices stood at about $6.50 a gallon on Friday, according to AAA, just below the record high of $6.53 hit on Sept. 22.
Analysts warn of a global backlash
Commodity strategists at Morgan Stanley said an export restriction would likely lower U.S. diesel prices initially but carry potentially adverse reactions downstream, including higher global diesel prices and a feedback loop into U.S. gasoline prices as refinery runs adjust. The American Petroleum Institute has also pushed back, with CEO Mike Sommers saying restricting exports would compound the problem rather than solve it.
Europe faces the biggest exposure
Benedict George, head of European product pricing at Argus Media, said a U.S. restriction would likely send European diesel prices and premiums against crude to a new unprecedented level, noting the U.S. has supplied about half of Europe's diesel imports over the last couple of months. He said oil traders in Europe mostly doubt Washington will actually restrict exports, given how challenging a move would be for U.S. oil companies.
George added that Ukrainian attacks on Russian oil refineries have added a whole new layer to the global supply crunch, calling diesel the biggest problem for the global oil system. Any U.S. restriction, if it happens, is expected to be short-term — George said traders see a window of two or three months at an absolute most, while the outcome of the Russia-Ukraine war remains impossible to forecast.
Source: CNBC
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