Who would be exposed if U.S. bans diesel exports? Goldman weighs in

Goldman Sachs has shared its analysis on the potential repercussions of the U.S. imposing a ban on diesel exports. According to the financial institution's notes, such a ban would likely have limited direct impacts on overall global growth, with Latin America being the most exposed region. Goldman analysts stated that the ban would ultimately prove to be inflationary for U.S. consumers.

The commodities team at Goldman estimates that a diesel export ban would cause a 25-cent decline in U.S. retail diesel prices per gallon for each week it is in effect. This modest price reduction would result in a small 2 to 3 basis point decrease in headline U.S. inflation after a month. However, the bank's strategists believe that this short-lived inflation reduction would likely reverse and turn inflationary for consumers within approximately two months.

This change is attributed to the ban's potential to raise U.S. retail gasoline prices by $0.30 per gallon once diesel storage capacity becomes depleted.

Using global input-output tables, Goldman estimates that a sudden halt in U.S. diesel supply could cause GDP to shrink by around 1% in Latin America. The bank believes that inventory buffers and increased exports from other nations would help mitigate this impact. Outside the Americas, Goldman sees only minor direct economic effects on activity, given the lower reliance on U.S. imports and the anticipated rapid reallocation of supply from other regions.

As diesel markets are global, the bank expects supply to adjust swiftly, leaving higher prices as the main economic consequence.

Goldman predicts that each sustained 10% increase in diesel prices would add 0.1 percentage point to global headline inflation and 0.03 percentage points to core inflation. The negative effects would be more pronounced in emerging Asia and Europe, where the diesel market plays a larger role.