US President Donald Trump on Tuesday (September 22) explicitly expressed his support for banning diesel exports, saying it would help curb soaring energy costs. Diesel prices in Europe and the US have jumped to record highs, with the national average retail price exceeding $6.50 per gallon, a record high and more than 75% higher than a year ago. The price surge is mainly due to the conflict related to Iran and the Russia-Ukraine war, which have led to a significant reduction in exports from major producing countries, resulting in continued tight global supply. US Treasury Secretary Bessenter stated that the government is studying the feasibility of such a ban and its impact on refining capacity.

Trump explicitly supports the diesel export ban, with midterm election pressure acting as a driving force.

Before meeting with Ukrainian President Zelensky, Trump told reporters, "I've said it before, stop exporting diesel. We produce a lot of diesel... I've made that request, and I've made it to my team." This statement comes as U.S. diesel prices hit record highs. This week, some Republican Senate candidates facing fierce competition in the November 3 midterm elections publicly called for an export ban to alleviate high cost pressures on the public, particularly impacting farmers and the freight industry. At the same event, Bessant stated that the government is studying the feasibility of such a ban, whether a complete or partial export ban would be effective, and assessing its impact on overall refining capacity. This policy shift indicates that energy costs have become a core political issue ahead of the midterm elections, and the discussion of an export ban has moved from a peripheral proposition to a policy evaluation stage.

Record diesel prices are driven by global supply shortages.

According to AAA data, the average retail price of diesel in the United States recently broke through $6.50 per gallon, a record high, representing a significant increase of over 75% compared to a year ago. The price surge is primarily due to the conflict in Iran and the Russia-Ukraine conflict, which have led to a sharp reduction in exports from major producing countries such as Russia, Saudi Arabia, and the UAE, resulting in continued tight global supply. Goldman Sachs and other institutions point out that diesel remains the "epicenter" of the current global fuel supply shortage. Damage to refineries in the Middle East and Russia has resulted in low inventory levels, and the scale of unexpected refinery shutdowns at the end of August was about 60% higher than the seasonal normal level. The tight situation is expected to continue until 2027. Diesel prices and crack spreads are expected to continue to rise, but refineries prioritizing diesel production are rapidly tightening the gasoline market. This means that the diesel shortage not only pushes up diesel prices themselves but also transmits to the gasoline market through refinery output adjustments, creating broader fuel supply pressure.

Inventory data diverge: crude oil inventories accumulate, while refined oil inventories continue to decrease.

The market is focused on US inventory dynamics. An analyst survey shows that for the week ending September 18, commercial crude oil inventories are expected to decrease by 500,000 barrels to approximately 422.9 million barrels; distillate fuel inventories, mainly diesel, are expected to decrease by 500,000 barrels to approximately 107.4 million barrels; gasoline inventories are expected to remain flat at approximately 207.7 million barrels; and refinery capacity utilization is expected to decline by 0.6 percentage points to 96.2%. Preliminary API data shows that crude oil inventories actually increased by approximately 1.786 million barrels during the same period, while gasoline and distillate fuel inventories decreased by approximately 2.16 million barrels and 2.164 million barrels respectively, indicating continued destocking in refined products. This divergence between crude oil inventory accumulation and refined product inventory reduction reflects that refineries prioritize processing crude oil to produce diesel, driven by diesel profits. However, refined product supply remains tight, especially with the continued decline in diesel inventories, further confirming the tight global diesel supply situation.

Potential impacts of the export ban: risks of refinery production cuts and global ripple effects

U.S. diesel exports had previously risen to a high of approximately 1.6 million barrels per day, representing a significant proportion of refinery output. Industry groups warned that the export ban could lead to overall refinery production cuts, impacting gasoline supplies and driving up global prices, while potentially putting pressure on supplies to allies such as those in Europe. This warning reveals the inherent contradiction of the export ban: short-term export suppression may lower domestic diesel prices in the U.S., but if refineries reduce production due to the loss of export markets, domestic gasoline and other refined product supplies could tighten, thus pushing up overall energy costs. Furthermore, the global market will tighten further due to reduced U.S. exports, potentially putting even greater pressure on allies like those in Europe that rely on U.S. diesel supplies. Trump also stated that he would discuss the attacks on Russian refining facilities in Ukraine with Zelensky, calling them "a heavy blow to Russia and a serious shock to diesel prices," and expressed optimism that the two leaders would explore solutions to end the Russia-Ukraine war.

Editor's Summary

The Trump administration is assessing diesel export restrictions in response to record domestic oil prices and political pressure. The global supply shortage stems from the ongoing impact of geopolitical conflicts on refineries and exports in the Middle East and Russia, and inventory data and institutional analysis suggest that the diesel market tightness may persist for an extended period. The implementation of these policies will depend on the results of feasibility assessments, while also weighing the impact on refinery operations, allied supplies, and the overall fuel balance. The approaching midterm elections further increase the urgency of a short-term policy response.

Frequently Asked Questions

Q: What are the main reasons Trump supports banning diesel exports? A: Trump's support for this proposal is primarily aimed at curbing the soaring energy costs in the US, especially with diesel prices reaching record highs, putting pressure on farmers, truck drivers, and the overall economy. He stated that he has raised this issue within his team, hoping to increase domestic supply by restricting exports, thereby alleviating price increases. This statement comes ahead of the midterm elections, with some Republican candidates calling for similar measures to ease the cost burden on voters. Q: Why have diesel prices in the US and Europe reached record highs? A: The main reason is the conflict related to Iran and the Russia-Ukraine war, which have led to a significant reduction in exports from major producing countries such as Russia, Saudi Arabia, and the UAE. Global diesel supply is tight, with the average retail price across the US exceeding $6.50 per gallon, and similarly high prices in Europe. Low inventories and unexpected refinery shutdowns exceeding seasonal levels have further pushed up prices. Q: What is the Treasury Department's stance on the export ban? A: Treasury Secretary Bessant stated that the government is studying the feasibility of a ban and whether a full or partial ban would be effective, focusing on assessing the impact on overall refining capacity. Currently, it is still in the research phase, and no final decision has been made; policy direction depends on the assessment results. Q: What are analysts' expectations for US inventories last week? A: Surveys indicate that for the week ending September 18, commercial crude oil inventories are expected to decrease by approximately 500,000 barrels, distillate fuel (mainly diesel) inventories are expected to decrease by approximately 500,000 barrels, gasoline inventories are expected to remain flat, and refinery utilization is expected to decrease by 0.6 percentage points to 96.2%. Preliminary API data shows an increase in crude oil inventories, but refined product inventories continue to decline, reflecting continued tight supply and demand in the diesel market. Q: What impact might a diesel export ban have? A: Supporters believe it could increase domestic supply and lower prices; however, analysts and industry groups warn that it could force refineries to reduce production, consequently reducing gasoline output, pushing up global diesel prices, and affecting supply to allies such as Europe. Goldman Sachs and other institutions point out that the tight diesel market may continue until 2027, and the policy's effectiveness is uncertain, requiring careful consideration.