Diesel Export Ban? Why It Could Backfire Fast

Diesel prices are fluctuating rapidly, and even financial experts like JPMorgan are unsure of how it will play out. John Kingston, an energy reporter from FreightWaves, explains the 25-cent futures movement, the potential export ban, and how different regions like New England, the Gulf Coast, and the West Coast would be affected differently.

While a U.S. ban on diesel exports might seem like a quick fix, it could actually worsen regional disparities rather than providing widespread price relief. Kingston points out that the U.S. hasn't imposed a diesel export ban since 2015, following the shale boom. The structural issue with such a ban is the uneven supply across regions - New England has no nearby refineries and relies on European imports, which could become pricier or scarce if exports are restricted.

The Colonial Pipeline, which transports gas from the Gulf Coast to New York, is already operating at full capacity and may not have room for more volume. The West Coast also faces similar challenges - Gulf Coast diesel cannot reach it easily without going through the Panama Canal, a long and costly route. Additionally, tanker rates are extremely high, limiting the ability to redirect barrels even with a Jones Act waiver.

A ban would also remove the incentive for refiners to maintain high production levels, as diesel and gasoline margins are currently very profitable. With refinery maintenance schedules already in place to reduce output, a ban could compound the issue. JP Morgan's commodity research team recently admitted that they see no resolution to high energy prices, with red lines like $100 Brent crude, a 5-handle on the 10-year Treasury yield, and $4 gasoline not yet triggering policy changes.

Trucking regulatory changes include a nationwide hours-of-service waiver for fuel haulers and ongoing discussions about commercial driver's licenses and cybersecurity in the freight industry.