US diesel export ban would cut US prices but raise them in Europe: Goldman Sachs

A US diesel export ban could initially reduce diesel prices by 25 cents per gallon in the US, a nearly 4% decrease. However, European diesel prices would rise by about 2%, or $3 per barrel, according to analysts at Goldman Sachs in a recent report. The ban would primarily impact the US, the world's leading diesel exporter, as domestic prices surge due to a Middle East supply crunch caused by the US-Israel conflict with Iran.

The Platts-assessed US Gulf Coast Export ULSD price peaked at $4.7833 per gallon on September 16, the highest on record. While the US could impose export restrictions, this scenario is not considered the base case by the analysts. If the ban persists, US gasoline prices may climb higher because diesel, gasoline, and jet fuel are produced together.

As US diesel stocks approach storage limits, this would intensify downward pressure on diesel prices, squeezing refining margins and possibly leading to reduced US refining output. Once storage is full, retail gasoline prices in the US could rise by 30 cents per gallon. If the export ban is lifted, US diesel prices would likely align with global prices, including European levels, putting upward pressure on diesel prices in the US and downward pressure on prices abroad.

However, global refined oil product prices would still likely be higher than without both the US export ban and the subsequent decline in US refinery output. Goldman Sachs suggests buying European gasoline as markets are "tightening rapidly," with the possibility of a US gasoline export ban tightening markets outside the US. Europe's gasoline strategic petroleum reserve (SPR) reserves are four times smaller than its diesel reserves, according to the analysts.