US diesel prices hit record high: Will Trump’s 90-day export ban actually lower prices?

U.S. diesel prices have reached record highs, causing concern for businesses relying on diesel for transportation, farming, and other operations. This surge has been exacerbated by the ongoing Iran war, which has disrupted global fuel markets and driven up diesel costs. The Trump administration is reportedly considering a 90-day ban on U.S. diesel exports as a potential solution to increase domestic supply. According to Politico, if enacted, the ban could remain in place until the end of 2026.

The administration's reasoning behind the proposal is straightforward: by keeping more diesel within the U.S. instead of exporting it abroad, they aim to increase domestic supply and eventually lower diesel prices. However, fuel experts and economists caution that the plan could have unintended economic consequences and may not effectively address the root causes of the record diesel prices.

Tobin Marcus, head of US policy and politics at Wolfe Research, noted that Trump's proposal appears to be a response to demands for relief but acknowledges the potential for unforeseen consequences. One major concern is that an export ban could result in lower revenues for U.S. energy companies, potentially prompting them to cut production.

Additionally, diesel production is unevenly distributed across the country, with a significant portion concentrated along the Gulf Coast, while shortages are emerging in the Northeast and West Coast. Moving the excess fuel across the country would be challenging, as many pipelines are already at or near full capacity. Transportation costs may increase if additional fuel needs to be moved by water.

The primary challenge for Trump's plan lies in the fact that diesel prices are influenced by the global market rather than just U.S. supply. US refiners decide where to sell their diesel primarily based on the price they can receive in different markets. If overseas buyers are willing to pay more, U.S. companies will have a strong financial incentive to export diesel.

The U.S. has implemented export restrictions on crude oil during previous energy crises, such as the 1973-74 Arab oil embargo. Congress passed the Energy Policy and Conservation Act of 1975, directing the president to largely restrict exports of U.S.-produced crude oil. However, research later found that these restrictions had little impact on the daily price pressure faced by Americans and may have even encouraged US producers to reduce their output.

The restrictions were eventually repealed in 2015 after the U.S. shale boom significantly increased domestic oil production.