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Oil companies’ motives have been the subject of senseless political rhetoric in Washington for more than a century. With the mid-term elections rapidly approaching, lawmakers are continuing this time-honored tradition by calling for a ban on diesel exports – this time, it’s mostly coming from Republicans. It’s a bad idea and a big mistake for President Trump to embrace. We’ll get to that part later.

First, let’s start with some basic information about the U.S. refining industry. The U.S. Gulf Coast (PADD 3) contains over half of the total U.S. refining capacity. Pipelines moving refined products to the East Coast (PADD 1) and Midwest (PADD 2), such as the Colonial Pipeline, frequently run at or near max capacity. That is why, even before the Iran war started, the Gulf Coast exported diesel and other refined products while other parts of the country imported those same products from Canada or overseas.

If you ban diesel exports from the Gulf Coast, refiners there will still have very few avenues to get their product to market (even with the Jones Act waiver). As these barrels stack up, the logical thing for them to do is start catching up on long-deferred maintenance at their facilities. That means overall production will fall, essentially nullifying the perceived supply-increase benefits of an export ban.  

In 2022, when fuel prices were high because of the war in Ukraine, two analyses looked at the impact of an export ban. An American Council for Capital Formation’s July 2022 study estimated that a ban on diesel (without Jones Act waivers) would shutter approximately 1.3 million barrels per day of refining capacity, raise East and West Coast distillate prices by more than 45 cents per gallon during the second half of 2022, and reduce 2023 GDP by more than $44 billion. Likewise, the Dallas Federal Reserve examined proposals to lower domestic fuel prices by banning U.S. crude oil exports. It concluded that such restrictions would ultimately backfire and drive pump prices higher. The authors explain that because domestic refined fuels like gasoline and diesel are globally traded commodities, restricting U.S. crude exports would reduce overall supply on international markets and raise global prices. Because refiners sell products based on global benchmarks, domestic fuel prices would not drop and could even rise, denying consumers any financial relief while temporarily enriching light-sweet crude refiners. Over time, the resulting collapse in domestic oil prices would force U.S. oil producers to scale back operations, worsening the national trade deficit, deepening long-term dependence on foreign crude, and leaving the domestic economy more vulnerable to future international supply shocks.

Reducing refinery runs would reduce not only diesel supply, but also the supply of other refined products. Each barrel of crude oil yields multiple products. If diesel production is cut, other production falls too. So a diesel ban would likely push up gasoline prices as well. But it gets even worse. U.S. diesel exports are a major part of global supply, and they’ve helped limit upward pressure on global prices. Eliminating those exports will push global prices even higher. So everywhere in the U.S. where diesel is imported (most of the country) will face higher prices after an export ban.

Since the start of the Iran conflict earlier this year, prices of all oil and gas commodities (crude oil, fertilizer, LNG, and refined products like gasoline and diesel) have increased. This is a natural consequence of a major war in the Middle East. That conflict, and the war between Russia and Ukraine (especially with the latest phase of Ukrainian drones taking out Russian refineries), directly drives high diesel prices worldwide. As long as these conflicts persist, diesel prices will remain elevated – export ban or no export ban. 

The Biden administration considered a diesel export ban, prompting Energy Secretary Jennifer Granholm to ask the National Petroleum Council for a report. The Biden NPC concluded that it would be a bad idea, citing that “free, unrestricted trade is key for the efficient operation of markets and enabling the lowest cost supply.” The point is this: even President Biden, who paused LNG exports in the run-up to a political election, passed on a diesel export ban. 

And now, to return to President Trump. We hear that his administration is getting ready to pull the trigger on a 90-day diesel export ban, something that even President Biden decided was an unwise move. Doing so may curry favor with politicians in Iowa, Michigan, or Tennessee, but it will ultimately prove to be costly. Democrats, who for years have called for export bans on crude oil, diesel, and natural gas, are surely going to call on President Trump to do more of the same if they end up holding the gavel next January. More importantly, the farmers and motorists who are being promised relief at the pump will be very disappointed. Let’s hope cooler heads like Energy Secretary Chris Wright and Secretary Doug Burgum prevail. 

President Trump was firm in his resolve that the upcoming election is the furthest thing from his mind in his prosecution against Iran’s desire to possess a nuclear weapon. Unfortunately, higher diesel prices are an unintended consequence of this effort. The President should apply that same resolve and resist calls from his fellow Republicans to make matters worse for American farmers and motorists by messing up energy markets.