Winehole23
09-23-2026, 08:22 AM
Republicans are getting crushed by rising fuel costs and calling for a diesel export ban to relieve the pressure
That could backfire in a number of ways, causing worse pain down the road
...banning diesel exports is misguided. An export ban would further strain a segmented U.S. energy market, send prices higher and harm the people the policy is intended to help.
Policy actors whose priority is inherently short term—getting re-elected—will often fall to the temptation of implementing policy that is in their near-term interest but detrimental to the economy.
The diesel export ban is a good example.
The elimination of 1.67 million barrels per day of diesel exports would create a short-term domestic surplus, which would then have to be sold at a discount. Prices would decline, and policy actors would be able to claim that they are addressing a growing affordability crisis.
But such a ban would end up doing the opposite: raise prices and reduce supplies.
Because the U.S. exports its surplus production—total production is 5.3 million barrels per day, above 3.6 million barrels of daily domestic demand—energy firms would pull back on production until it reaches the new and lower equilibrium.
Revenues would decline for energy firms, and industry unemployment would most likely increase.
And shortage of supply would not only be for diesel but also most likely gasoline as the crude that was previously dedicated to the production of diesel would need to be sold, resulting in increased exports of raw crude at higher prices.
A bifurcated price structure domestically would ensue, creating further uncertainty across the economy.
Already, diesel prices on the Gulf Coast are lower than on the West Coast while prices on the East Coast are closer to internationally set levels.
Even if the Jones Act, which requires all goods transported by water between U.S. ports to be on American-owned and staffed ships, had its temporary exemption, which expires Nov. 15, made permanent, it would not eliminate the bifurcated price structure that would ensue.
Increasing complexity within an antiquated energy infrastructure is in no one’s economic or policy interest.
Second, such a ban would result in the elimination of the 1.67 million barrels in U.S. diesel exports, reducing the total global supply by just over 18%.
That would send global prices higher, creating conditions in which those costs would be passed along to the production of other goods, which the U.S. imports.
A negative feedback loop would then ensue, worsening an already deteriorating international pricing environment that would most likely prompt global central banks to raise policy rates more than they intend.
https://realeconomy.rsmus.com/the-folly-of-a-diesel-export-ban/
That could backfire in a number of ways, causing worse pain down the road
...banning diesel exports is misguided. An export ban would further strain a segmented U.S. energy market, send prices higher and harm the people the policy is intended to help.
Policy actors whose priority is inherently short term—getting re-elected—will often fall to the temptation of implementing policy that is in their near-term interest but detrimental to the economy.
The diesel export ban is a good example.
The elimination of 1.67 million barrels per day of diesel exports would create a short-term domestic surplus, which would then have to be sold at a discount. Prices would decline, and policy actors would be able to claim that they are addressing a growing affordability crisis.
But such a ban would end up doing the opposite: raise prices and reduce supplies.
Because the U.S. exports its surplus production—total production is 5.3 million barrels per day, above 3.6 million barrels of daily domestic demand—energy firms would pull back on production until it reaches the new and lower equilibrium.
Revenues would decline for energy firms, and industry unemployment would most likely increase.
And shortage of supply would not only be for diesel but also most likely gasoline as the crude that was previously dedicated to the production of diesel would need to be sold, resulting in increased exports of raw crude at higher prices.
A bifurcated price structure domestically would ensue, creating further uncertainty across the economy.
Already, diesel prices on the Gulf Coast are lower than on the West Coast while prices on the East Coast are closer to internationally set levels.
Even if the Jones Act, which requires all goods transported by water between U.S. ports to be on American-owned and staffed ships, had its temporary exemption, which expires Nov. 15, made permanent, it would not eliminate the bifurcated price structure that would ensue.
Increasing complexity within an antiquated energy infrastructure is in no one’s economic or policy interest.
Second, such a ban would result in the elimination of the 1.67 million barrels in U.S. diesel exports, reducing the total global supply by just over 18%.
That would send global prices higher, creating conditions in which those costs would be passed along to the production of other goods, which the U.S. imports.
A negative feedback loop would then ensue, worsening an already deteriorating international pricing environment that would most likely prompt global central banks to raise policy rates more than they intend.
https://realeconomy.rsmus.com/the-folly-of-a-diesel-export-ban/