President Donald Trump's administration does not plan to put a "blanket ban" on US diesel exports but is more likely to pursue voluntary restrictions on diesel flows, US energy secretary Chris Wright said on Wednesday.
Trump's call for a diesel export ban on Tuesday has been met with condemnation by oil industry leaders, who have publicly broken ranks with the administration over an idea they say will be disastrous for their industry and not deliver long-term relief from high fuel costs. Rather than banning diesel exports, Wright said the administration is instead looking at making "adjustments with diesel" in hopes of lowering fuel prices from their current record highs.
"This is more likely to be done entirely voluntary," Wright said at an event Heatmap News hosted in New York. "We will not cease exports of US diesel. But may there be some tweak in where diesel flows out of US refineries? Yeah, I think we're going to see that because it can stop the rise in price of diesel."
Oil industry executives are counting on Wright and others in the administration to convince Trump to resist pressure from Republicans who believe a diesel export ban offers their best shot at retaining control of the US Congress in the upcoming midterm elections on 3 November.
"This would be a really bad decision by this administration," American Petroleum Institute chief executive Mike Sommers said in a televised interview. "Fortunately, the president is surrounded by people that are saying that this is a bad idea", including Wright and US interior secretary Doug Burgum, who said last week he opposed banning energy exports.
The US on net exported 1.1mn b/d of diesel last year, according to the Energy Information Administration (EIA). Refiners say they will run out of storage space for diesel within weeks if exports were suddenly blocked, forcing across-the-board cuts in production of all fuels, that would translate into higher gasoline prices domestically and abroad. US ultra-low sulphur diesel inventories were at 96.4mn bls for the week ended 18 September, according to the most recent EIA data, about 14pc lower than year-earlier levels. Diesel demand was 3.97mn b/d for the week, up by 6.3pc from a year earlier as the US harvest season is in full swing.
Despite opposition to a diesel export ban from Wright and Burgum, administration officials are still studying the idea. On Tuesday, US treasury secretary Scott Bessent said they were reviewing the feasibility of a "full or partial ban" on diesel exports.
Asked if there was a rift in the administration on a diesel export ban, the White House said Trump make a decision that "is best for the American people. He wants to see gas prices at the pump fall and is evaluating all the options on the table."
Election season push
Republicans hoping to avoid crushing losses in the midterms are continuing to push for a full diesel export ban, however. US senator Chuck Grassley (R-Iowa) said on Wednesday he hoped the White House would not listen to "Big Oil" claims that an export ban would not work.
"IF U CAN EMBARGO CHIPS U CAN EMBARGO DIESEL," Grassley said in a social media post.
Trump outlined his support for a diesel export ban Tuesday while taking questions from reporters, saying a decision on a potential ban would come "fast". Commodity analysts say Trump is running out of time for new policies to have an effect on prices before most voters have cast ballots for the 3 November elections.
"We do think if significant changes happen in energy policy — whether it's probably export restrictions, amid this deal, a Russia-Ukraine energy ceasefire — the time to do it is probably now or in the next few days, at most weeks," Goldman Sachs co-head of global commodities Daan Struyven said in a Bloomberg Television interview.
A diesel export ban might temporarily lower domestic diesel prices, according to Tom Pyle, president of the nonprofit the American Energy Alliance. But it would be replaced by higher prices for gasoline and diesel as refineries cut runs, he said.
"Not only will it not do what they claim it will do, but the folks advocating for this on the campaign trail will have buyer's remorse," Pyle said.
Anything short of an export ban — like a voluntary curtailment that Wright suggests — would be a "victory" for the oil sector and less disruptive on markets, Pyle said.
Other cost-cutting options
Republicans are pursuing ideas outside of an export ban to lower fuel prices.
Ohio lawmakers are considering voting soon to suspend state fuel taxes, with the backing of Republican gubernatorial candidate Vivek Ramaswamy. US senator Susan Collins (R-Maine), who is fighting to retain her seat, on Tuesday urged the administration to release diesel from a 1mn bl strategic reserve in the US northeast.
Louisiana governor Jeff Landry (R) on Wednesday issued an emergency directive suspending enforcement of a ban of highway use of dyed diesel, which does not include the 24.4¢/USG federal tax on diesel and is typically used on farms.
