As U.S. fuel prices continue soaring to record highs, the Trump administration is floating a possible export ban on diesel to help mitigate those impacts. But while that might provide some modicum of short term relief, it's a move that many industry experts warn could ultimately backfire.
As the American Petroleum Institute pointed out in a September 23 analysis, diesel prices in the U.S. are shaped primarily by the global balance of supply and demand. The U.S. is a substantial piece of that puzzle, as the nation that supplies around 20% of all diesel traded globally by sea each day, making any export ban extremely impactful from an economic perspective.
"Removing that much fuel from the global market would exacerbate the very global refining crisis that is increasing prices here in the U.S." the API explained.
More than half of U.S. refining capacity is concentrated along the Gulf Coast, where refineries consistently produce more fuel than they can sell locally. The West Coast produces enough diesel to meet its own demand, but mostly imports its gasoline and jet fuel. The East Coast lacks refining capacity, and relies primarily on diesel shipped by barges from the Gulf Coast, or imported from abroad.
Gaming it out, a weeks-long diesel export ban would likely lead to sharp decreases in prices in the Midwest and Gulf Coast regions, where supplies that were originally tagged to go overseas would instead flood back into the local market. However, more import-reliant regions like the East Coast could actually see higher prices, since they'd be forced to compete with global buyers for a smaller supply of non-U.S. fuel.
In the event that an export ban drags on for months or longer, refineries would likely start scaling back production to avoid having to hold on to more diesel than they sell locally.
"In such a scenario, national and global crude oil prices could then rise," the Atlantic Council think tank warned in a September 22 blog post.
The impacts could also extend beyond fuel prices, affecting international supply chains, agriculture, shipping and manufacturing. And like it or not, the U.S. exists as part of the larger global economy. In Latin America, agricultural supply chains are heavily dependent on U.S. diesel. At least 40% of U.S. agriculture imports come from Mexico and other parts of Latin America. If the region no longer has access to American diesel, those impacts will inevitably find their way back to U.S. food supplies.
Elsewhere, Brazil relies on American diesel to produce the coffee and iron ore that it sends back to the United States. Chile depends on imported diesel to maintain its status as the world's largest producer of copper. The fallout could even ripple through the AI sector, the Atlantic Council posits, given that Texas's Port of Laredo operates as a vital hub for importing computer-related machinery used for AI data centers, and nearly all of those goods are shipped by truck from Mexico.
In the meantime, reports have varied regarding how serious the Trump administration is about moving forward with some form of an export ban. President Donald Trump has spoken favorably of the idea in recent days, even while Energy Secretary Chris Wright, Treasury Secretary Scott Bessent, and Interior Secretary Doug Burgum have reportedly warned against the idea, Politico reports.
