A ban on US diesel exports, a measure floated to alleviate record-high diesel prices, would likely cause an increase in gasoline prices, according to financial analysts and energy experts. This counterintuitive outcome stems from the operational realities of US oil refineries, which produce multiple fuels simultaneously. If a diesel export ban creates a domestic surplus of diesel, refineries might have to reduce their overall crude processing rates, thereby decreasing the production of gasoline as well.
Several experts have warned about this potential ripple effect. The US Energy Secretary Chris Wright stated that a diesel export ban "definitely doesn’t work" and could push up gasoline and jet fuel prices, because if refiners can't export diesel, they will run out of storage and be forced to reduce US refining output. Similarly, analysts from S&P Global warned that a complete export ban could force American refiners to slash crude runs by nearly 2 million barrels per day, a scale not seen since the COVID-19 pandemic, potentially reducing US gasoline production by as much as 750,000 barrels per day and turning the US into a net gasoline importer.
While a ban might offer short-term relief in specific US regions like the Gulf Coast by increasing domestic supply, it would disrupt global markets and likely lead to higher prices elsewhere, impacting US allies. Experts highlighted that the US lacks the infrastructure to efficiently transport diesel across the country, meaning that areas like the West and East Coasts, which often import from overseas, would not see price relief and could even face higher costs due to a global supply reduction. The US exported a record 1.6 million barrels per day of diesel in August, and banning these exports could raise global diesel prices by as much as 100%, according to economist Verleger.
Instead of a blanket ban, analysts suggest more nuanced approaches. GasBuddy's head of petroleum analysis, Patrick De Haan, likened a ban to a "sledgehammer" and suggested alternatives like taxing diesel exports to subsidize US prices. Experts also indicated that partial export restrictions, such as capping exports to previous year levels, would be less disruptive than a complete ban. However, the overarching consensus is that a full ban would be highly disruptive to fuel markets globally and would likely result in unintended consequences, including higher gasoline prices domestically.
