Analysts warn a US ban could spike global fuel costs
President Donald Trump said Sunday he would back a US diesel export ban as national pump prices hover near a record average of $6.45 per gallon, according to the American Automobile Association, with midterm elections weeks away. The proposal would redirect more of the four to five million barrels of diesel US refiners produce each day toward the domestic market, where Americans consume about 3.6 million barrels daily. Between 1.2 and 1.5 million barrels per day are exported, making the United States a central supplier to markets in Latin America and Europe.
Trump argues the move would lower pump prices and deliver immediate relief to drivers, truckers and businesses ahead of the midterm elections. He told reporters Sunday that the administration was “thinking about it very seriously.” The remarks followed comments on the sidelines of the United Nations General Assembly that he had called to “not send out the diesel.” Supporters, including Representative Ashley Hinson and Senator Dan Sullivan, both Republican lawmakers, frame a ban as a way to shield the domestic economy from foreign shocks, arguing that American energy should serve American workers first.
US diesel prices have climbed to a record high of more than $6.50 per gallon — up nearly 70 percent year on year. The spike has been driven by energy-market shocks tied to the conflict with Iran and disruption to shipping through the Strait of Hormuz, a waterway south of Iran through which roughly one-fifth of the world’s oil and gas normally flows. Diesel primarily fuels commercial vehicles in the United States, including freight trucks, farm machinery and cargo trains, so higher prices can ripple through food, construction and other costs.
Between 60 and 70 percent of US diesel exports go to Latin America, where countries including Mexico, Brazil, Chile and Ecuador depend on American shipments to power transport, farming and factory sectors. Significant volumes also cross the Atlantic to France, the Netherlands and the United Kingdom as European buyers seek alternatives to Middle Eastern supplies.
In the United Kingdom, diesel prices at the pump have hit an all-time high, prompting warnings about logistics costs and household budgets. Chancellor John Healey told BBC News that the UK is in talks with US authorities over a potential diesel export ban and has begun preparing for it. France and other continental European governments are also grappling with similar cost-of-living pressures from rising fuel prices.
Cutting off US exports would remove more than a million barrels of daily American supply from the global market, triggering a fierce bidding war among importing nations in Latin America and Europe. David Fyfe, chief economist at Argus Media, said the move would likely cause international prices to spike, pushing up global freight, food and industrial costs and “feeding inflation back into the global economy.” “At a stroke, the US’s reputation as a reliable supplier of energy to the world would be shot,” Fyfe added. Sarah Raffoul, analytics manager at Argus Media, said higher international prices would eventually curb demand, but that the immediate gap would severely strain trade relationships and accelerate global inflation.