By: Jon Costello
The Trump administration appears to be days away from announcing measures to keep more diesel in the United States. An outright ban on exports looks less likely than it did earlier this week.
The idea moved quickly from speculation to a serious policy discussion after President Trump said on September 22 that he supported restricting diesel exports. The following day, however, the White House denied a Politico report that it was preparing a 90-day blanket ban, while Energy Secretary Chris Wright argued that an outright ban would not work. Wright said blocking exports could eventually force U.S. refiners to cut production, reducing supplies of gasoline and jet fuel along with diesel.
The legal path is also less straightforward than the headlines might suggest. In 2015, Congress repealed the provision that had expressly authorized the President to restrict exports of petroleum products. One plausible remaining route would be to declare a national emergency and invoke the International Emergency Economic Powers Act, which allows the President to regulate exports after declaring an emergency. The 2015 law did preserve a narrower power to restrict exports for up to one year in a national emergency or a Commerce-certified supply shortage. Still, that provision applies to crude oil, not refined products. According to the Politico report, the legal process for a ban was still being worked out.
The petroleum industry has also pushed back forcefully. Energy, refining, manufacturing and business groups have urged the administration to reject restrictions on fuel exports, arguing that they could reduce refinery utilization and ultimately leave the country producing less fuel rather than more.
None of this means the administration will do nothing.
Treasury Secretary Scott Bessent has said the administration is examining whether full or partial restrictions would work, while Wright has said the administration is working with refiners on a voluntary approach to increasing domestic diesel supplies.
No decision has been announced, but the options short of a ban are fairly well defined. The administration could ask refiners to voluntarily redirect cargoes to domestic buyers, which appears to be Wright’s preference. It could cap export volumes or require licenses for export cargoes, most likely under emergency powers. It could release the Northeast Home Heating Oil Reserve, which a bipartisan group of senators asked Trump to do on September 23. However, the reserve holds only about 1 million barrels, less than one day of recent U.S. distillate exports. It could also extend and simplify the Jones Act waiver that has allowed foreign-flagged tankers to carry fuel between U.S. ports since March. Each path would have very different consequences for refiners and for regional prices.
That is what I want to examine here.