President Donald Trump confirmed that the White House is giving serious consideration to banning diesel exports as high fuel prices weigh heavily on voters’ minds ahead of the midterms in November. 

“We’re thinking about it very seriously. That can oftentimes lead to a little bit of an increase on gasoline for cars, so we’re looking at it very seriously. We may do it,” Trump told a Fox News reporter while attending the Presidents Cup golf tournament last week in Illinois.

Experts warn that a ban on exports would, at best, bring only temporary relief to fuel prices, but the ban has its supporters. Before the president voiced tentative support for the proposal, two members of the Iowa Republican congressional conference were championing the idea. 

Sen. Chuck Grassley urged the White House to disregard statements from “Big Oil” claiming the export ban won’t work. 

“Big Oil doesnt need 2 charge sky-high diesel prices 4 Iowa farmers + truckers just filling up They shld cut price 4 US diesel&get the $$ frm other countries IF U CAN EMBARGO CHIPS U CAN EMBARGO DIESEL,” Grassley said in a post on X. 

Rep. Ashley Hinson called on the House to return to Washington to pass a “pause” on diesel exports, among other actions to lower fuel prices. 

“Americans need relief and I’ll work with anyone to deliver,” she said. 

Fueling the economy

Record-high diesel prices are hitting farmers, truckers and local communities. Over the past month, 16 trucking, delivery and transportation companies entered bankruptcy proceedings, and the high cost of fuel is likely a contributing factor in the companies’ decisions. 

Diesel is the fuel that drives the economy, and through production and transport, these costs impact just about every product Americans consume. So, the added costs will eventually filter down to everyone. 

Average U.S. diesel prices fell this week, down from $6.52 per gallon to $6.41 per gallon Thursday, but they remain at record highs. One year ago, they were at $3.71 per gallon, according to AAA. 

The Institute for Energy Research (IER) says the main drivers of the high fuel costs are a series of conflicts in Russia and the Middle East, as well as the depletion of stockpiles after months of war. 

Ukraine stepped up its drone strikes against Russian refineries, hitting a refinery once every three days, on average, in the first eight months of this year. Half of Russia’s six largest diesel refineries cut or halted production in September, and its exports dropped. In July, Russia banned exports. 

Refineries throughout the Middle East have also been targets of hostilities. In March, industry monitor IIR estimated that nearly 1.9 million barrels a day of crude refining capacity in the Persian Gulf had shut down as a result of the war in Iran, and by May the consultancy was estimating that 3.52 million barrels a day of refining had been shut down. 

While these impacts are far away from U.S. consumers, the diesel market is global, and the loss of substantial outputs from refineries in Russia and the Middle East drive up the global price of diesel. 

Added to the depletion of refinery output flowing to the global market is the dwindling global reserves as the world taps stockpiles to make up for losses over the past several months. U.S. distillate stocks are the lowest for this time of year in EIA records going back to 1982, and the typical summer increase never happened. A similar picture can be seen in global oil and distillate stockpiles. 

Studies show limited relief

Recent analyses of the impacts of an export ban found that it would only temporarily lower prices in some regions of the U.S. 

The American Council for Capital Formation’s July 2022 study estimated that an export ban without Jones Act waivers – a 1920 federal law requiring that all goods moved by water between United States ports be carried on ships built, owned, and crewed by U.S. citizens – would shutter roughly 1.3 million barrels per day of refining capacity. 

This would, according to the study, raise East Coast, West Coast, and Rocky Mountain distillate prices by 45 to 51 cents per gallon during the second half of 2022, and reduce 2023 GDP by $44 billion. 

A 2022 McKinsey report found that an export ban could lower Gulf Coast and Midwest prices by about 20 to 25 cents a gallon, while raising international prices by roughly 60 cents per gallon. But a ban would further increase prices in import-dependent U.S. regions because of transportation constraints. 

The potential for immediate impacts on Midwest prices might explain the Iowa lawmakers’ interest in the ban, but both studies estimate that prices would eventually go up again. 

The IER points out that a diesel export ban would incentivize U.S. refineries to close for deferred maintenance. Refineries have been running at 95% for months, and if the products can’t be exported, many refineries would likely shut down to do the maintenance they have been postponing, putting upward pressure on prices. 

Long-term impacts 

Energy analyst David Blackmon argues on his “Energy Additions” Substack that intervention in diesel markets would also have longer term negative impacts. Regulations, Blackmon said, have made it nearly impossible to build new refining capacity in the U.S. These projects require billions in capital investment and years to construct. 

As with all the environmental regulations and permitting challenges, a ban on diesel exports, Blackmon wrote, would insert further uncertainty into investments in new refineries. 

“A big question remains whether American investors will have the confidence to step up and invest in the series of new refining operations needed to keep more of America’s domestic production at home," Blackmon wrote. 

"Any ban on exports for any length of time implemented for transparently political reasons would almost certainly answer that question in the negative. America cannot afford for that to happen.” 

The IER argues that only an end to the conflicts restricting global refinery output is going to have any impact on diesel prices. 

"An export ban does not add a single barrel of diesel to the world market. It moves barrels from Rotterdam and Lima to Chicago, and it raises the world price that sets what Americans pay on the East and West Coasts," the IER wrote. 

“Until peace comes, policymakers should focus on adding supply and moving it to where it is needed: keeping U.S. refineries running, and waiving the Jones Act so Gulf Coast diesel can reach the East Coast by ship.”