Diesel Prices Hit Record High Ahead of US Election, Fueling Speculation Over Export Ban

As global diesel supply tightness worsens following attacks on energy infrastructure in Russia and Saudi Arabia, growing concerns are emerging that the U.S. government may resort to an export ban to control diesel prices.

The Wall Street Journal (WSJ) reported that Representative Tim Burchett (R-Tenn.) introduced a bill on the 16th (local time) to temporarily ban diesel exports through January of next year in response to surging domestic diesel prices.

Prior to this, Senate Republican Whip John Thune (R-S.D.) had also shown openness to exploring a diesel export ban, according to the newspaper.

Cabinet officials in the Donald Trump administration have recently made public remarks that appeared not to completely rule out the possibility.

Energy Secretary Chris Wright, when asked in a CBS interview earlier this month whether he ruled out implementing a diesel export ban, did not explicitly deny it.

Interior Secretary Doug Burgum, who also serves as chair of the White House National Energy Council, remarked at a Group of 20 (G20) ministerial event this week that while it is not under consideration for now, the administration would consider an export ban if it determines it could effectively lower prices.

The U.S. administration has consistently denied the possibility of an export ban until now, marking a shift in its recent stance.

Experts warn that while export controls could temporarily increase domestic supplies and drive down prices, they risk driving up prices in the long run if energy companies cut back production in response to price changes.

Despite these side effects, the Trump administration and the Republican Party are toying with export controls because diesel prices have broken all-time highs day after day with the midterm elections just over a month away in November, posing an immediate political burden.

The average U.S. diesel price surpassed 6 dollars per gallon for the first time ever last week and has continued its upward trend this week.

On the 17th, it broke the record again, hitting 6.40 dollars per gallon.

The price surge was further fueled when an attack on Saudi Arabia's East-West pipeline compounded global supply chain disruptions already dealt by Ukrainian strikes on Russian refineries.

In fact, following the pipeline shutdown, refineries along Saudi Arabia's western Red Sea coast have been cut off from crude oil supplies.

By contrast, the United States is in a relatively better position as it houses some of the world's largest oil refineries across the Gulf Coast, the Midwest, and California.
 
Nevertheless, continued increases in diesel prices could drive up production costs across industrial activities, including trucking, and trigger widespread inflation, making it a key factor that could sway voters ahead of the election.

Kevin Hassett, assistant to the president and director of the White House National Economic Council, stated in a Fox Business interview last week that "diesel prices are currently the biggest concern," signaling that the White House is closely monitoring the rise in diesel costs.

The WSJ projected that diesel prices will likely continue to climb for a while as demand for agricultural machinery fuel increases ahead of the autumn harvest in the U.S., followed by the operation of heating oil boilers in the colder northeastern regions.

If a diesel export ban is actually implemented, a partial export ban linking domestic inventory levels with export volumes could be introduced, the newspaper reported.

According to reports, a stock-linked approach is also being discussed, where refiners' export quotas would decrease if commercial inventories fall below a certain threshold.

Andy Lipow, president of Lipow Oil Associates, diagnosed that implementing diesel export controls would lead refiners to reduce refinery throughput to match falling demand, which would spill over to other fuel products like gasoline and jet fuel.

"Shortages could expand to multiple petroleum products," Lipow warned, adding that "in this case, gas station prices could rise even further."

Harold Hamm, founder of energy company Continental Resources, also warned that "an export ban won't help and will only drive prices up further."

David Goldwyn, president of Goldwyn Global Strategies and former energy special envoy in the Barack Obama administration, said regarding the export ban, "After seeing a few months of effect, prices will rise again. The administration surely knows this, but the question is whether they have the will to stick to principles despite it."

(Photo: Getty Images, Federal Reserve Bank of St. Louis Economic Data, Yonhap News)
※ Please note: This article was translated by AI and may contain errors.