- The Trump administration is considering a possible ban on diesel exports, which has widened the gap between US crude oil futures and the global Brent benchmark, with West Texas Intermediate (WTI) crude futures trading as much as $12.02 a barrel under Brent on Thursday, their largest discount since May 6.
- Energy Secretary Wright has contacted executives at several major American refiners to gauge support for a ban on diesel exports, as the administration searches for an alternative to a short-term ban.
- Analysts warn that a diesel export ban could lead to a 12% cut in crude runs by US refiners, with key storage hubs likely to fill up within a month.
- Trump kept his promise by undoing the Biden-era LNG export permitting pause through an executive order hours into his first day, but now, more than a year and a half later, he is considering limiting US energy exports.
- The current focus is on a historic diesel spike, with Republican Sen. Chuck Grassley leading the charge for a US diesel export ban, saying record diesel prices are killing farmers' income.
The Trump administration's consideration of a diesel export ban comes amid a significant widening of the West Texas Intermediate (WTI) crude discount to Brent, now at $12.02 per barrel, the largest since May 6.124
Analysts warn that a ban could lead to a 12% reduction in refinery operations, as US refiners may need to cut crude runs by over 2 million barrels per day to manage rising diesel inventories. The US is currently the world's largest diesel exporter, with net exports of approximately 1.2 million barrels per day, according to Morgan Stanley.
The White House has denied reports of a planned 90-day ban, yet President Trump has expressed support for such measures, citing surging diesel prices that have reached record levels in both the US and Europe. US diesel prices are currently at $6.514 per gallon, driven by disruptions in global supplies due to the ongoing conflict with Iran.
Shipping costs have also surged, with freight rates for transporting crude from the US Gulf Coast to Asia now around $50 million, compared to $16 million before the Iran war escalated. This has contributed to the widening WTI-Brent spread, which is now expected to require a discount of around $8 per barrel to offset shipping costs.
The potential ban has sparked criticism from industry experts, with Mike Sommers, president of the American Petroleum Institute, stating, “Bad policy doesn’t become good policy just because the administration changes.” The oil industry is concerned that such restrictions could chill investment and provide opportunities for US adversaries in the global market.
As the administration navigates these complex issues, the political and economic pressures are mounting ahead of the midterm elections, with Republican leaders like Sen. Chuck Grassley advocating for the ban to alleviate the financial strain on farmers and other sectors affected by high diesel prices.78
“Energy Secretary Wright has contacted major refiners to gauge support, while Republican Sen. Chuck Grassley leads the charge, saying record diesel prices are 'killing' farmers' income. Wood Mackenzie estimates a ban would redirect a 700,000 bpd oversupply into storage, filling Gulf Coast inventories within a month.”
