NewsCommodities & ForexRepublicans Float Diesel Export Ban That Analysts Warn Would 'Backfire'

Republicans Float Diesel Export Ban That Analysts Warn Would 'Backfire'

Author: Alternet·

Key Takeaways

  • •Mike Rogers and Chuck Grassley are promoting a proposal for the United States to stop exporting diesel and reserve it for domestic use.
  • •Diesel prices have reached record highs, raising shipping costs for goods, groceries, and energy products nationwide, while gasoline prices may dip slightly.
  • •Analysts say an export ban could temporarily lower prices only in refinery-heavy Gulf Coast and Midwest regions, while import-reliant East and West Coasts might see prices rise.
  • •Experts warn refineries would likely reduce fuel production if they lose foreign buyers, resulting in less supply and higher prices overall.
  • •A White House official said the administration is not currently considering an export ban or restrictions, though pressure from the Iran war crisis keeps the debate alive.
Republicans Float Diesel Export Ban That Analysts Warn Would 'Backfire'

A Republican proposal to rein in soaring diesel prices by halting U.S. fuel exports is drawing warnings from energy analysts who say the plan could "backfire."

The idea, promoted by former congressman and current U.S. Senate candidate Mike Rogers (R-Mich.) and Sen. Chuck Grassley (R-Iowa), calls for the United States to consider refusing to export its own diesel to other countries and instead reserve it for domestic use. The push shows how record diesel prices have turned fuel policy into a live political issue, with supporters casting export limits as a way to keep American energy at home.

Diesel — the fuel that powers goods transport across the country by rail and truck — has reached a record high, adding costs to items shipped nationwide, including goods, groceries, and even oil and gas. Regular gasoline prices, by contrast, may see a small drop after per-barrel prices fell, as Saudi Arabia used a pipeline to funnel oil to the other side of the country for export. Diesel, however, keeps climbing. The export ban debate hinges on the structure of the U.S. fuel market: refineries clustered along the Gulf Coast and in the Midwest count foreign buyers among their biggest customers, while the East and West Coasts rely on imports to meet demand.

Matt Egan, senior business reporter at CNN, explained that such a strategy might "backfire."

"So, these Republicans are saying it's a make-or-break-glass moment," Egan said. "They're saying, let's keep more American energy at home instead of sending it overseas. Researchers, though, they're telling me that not only would an export ban fail to make diesel cheap again, they warn it could really backfire."

According to experts who spoke with Egan, prices might drop initially if such a ban were put in place, but the effect would be temporary and localized to the Gulf Coast and Midwest, where many refineries operate.

"The problem is that overseas diesel prices would surge, and that's an issue for the West Coast and the East Coast, because those areas rely on imports," Egan said. "So diesel prices might not fall at all on the West Coast or the East Coast. They might actually go up. Not only that, but how are refineries going to respond if they lose one of their biggest customers, foreign buyers? They're going to produce less fuel."

Ultimately, that would mean less fuel and higher prices.

Bob McNally, who served as energy advisor under President George W. Bush, told Egan that an export ban would be "an A.P.E., an authentic policy error."

"In fact, he said this would be the king of the A.P.E.s," Egan continued. "Now, perhaps this is why the White House is not embracing these calls for an export ban. A White House official telling me that the is not considering an export ban or restrictions, although this official added, at this time."

Pressure on the White House to address the crisis, created by the war in Iran, persists. AAA reported that in all the time it has tracked fuel costs, it has never seen an 83 percent spike in price. With the administration's position qualified as holding only "at this time," and analysts expecting the calls to continue, the export ban debate is likely to remain in front of policymakers while diesel prices sit near record levels.

"Bottom line though, [on the] export ban: We're going to continue to hear these calls, but analysts don't think this is going to fix the problem. In fact, they warned it could make it worse," Egan closed.