Morgan Stanley has cautioned that halting U.S. diesel exports could inadvertently drive gasoline costs upward. The financial institution anticipates that local storage facilities would reach capacity within a matter of weeks, compelling refineries to reduce production.
A comparable advisory was released on Wednesday by Goldman Sachs, as President Donald Trump contemplates implementing export restrictions to lower record-high diesel costs.
Record Pump Prices Put a Diesel Export Ban on the Table
Data from AAA cited by Bloomberg indicates that diesel prices have jumped 74% since February 27, which was the day before the war in Iran began. On Tuesday, the fuel reached an all-time high of $6.52 per gallon.
Gasoline costs have also risen significantly; AAA reported a national average of approximately $4.47 on September 24. This represents an increase of roughly 50% compared to the $2.98 average recorded on February 26 prior to the conflict.
Due to these soaring rates, Treasury Secretary Scott Bessent stated on Tuesday that the Trump administration is analyzing whether blocking fuel exports might offer some relief. President Donald Trump has expressed his support for an export restriction.
“We’re examining whether it’s feasible in terms of the overall refining capacity and whether a full or partial ban would work,” Bessent said.
These discussions have created divisions within the administration. Interior Secretary Doug Burgum and Energy Secretary Chris Wright have both spoken out against the proposed prohibition. Meanwhile, CNBC noted that in addition to the war in Iran, Ukrainian attacks on Russian refineries have forced Moscow to implement its own ban on diesel exports.
Why Refiners Would Pull Back if Diesel Stays Home
However, would a ban genuinely help lower prices? In a September 23 note, Morgan Stanley analysts, featuring Martijn Rats, detailed why such a measure might fail to achieve that goal.
“A diesel export ban could have the counterintuitive effect of an increase in gasoline prices if US refiners cut runs,” the analysts said.
The bank calculates that a ban would force refineries to decrease their processing runs by roughly 2 million barrels daily. Even if facilities adjusted their yields to focus on gasoline, total output for that fuel would still drop by about 650,000 barrels per day.
The analysts predict that domestic diesel prices would decline under a restriction, whereas international expenses would climb. They pointed to Europe as the territory facing the highest vulnerability.
Implementing a ban is not currently the bank’s base-case scenario. Nevertheless, the analysts anticipate that oil markets will remain erratic as the debate persists.
Daan Struyven, co-head of commodities research at Goldman Sachs, shared a similar perspective during an appearance on Bloomberg Television, noting that cheaper diesel would disincentivize refineries from maintaining high production levels.
“And because gasoline and diesel are usually produced together as a bundle with some flexibility, it would likely reduce the availability of gasoline,” he said.
Struyven emphasized that the specific framework of the policy would be critical, noting factors such as whether to utilize a quota or a total ban, and whether incentives should be offered to keep refineries operating.
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Frequently Asked Questions
Why are diesel and gasoline prices surging?
Diesel and gasoline prices have climbed substantially following the outbreak of the war in Iran on February 27, alongside Ukrainian strikes on Russian refineries that disrupted global fuel markets.
How would a diesel export ban affect gasoline prices?
According to Morgan Stanley, a ban could lead to higher gasoline prices because refiners would likely cut overall processing runs once domestic storage fills up, ultimately reducing the general availability of gasoline.
Which countries or regions would be most impacted by a U.S. diesel export ban?
Morgan Stanley analysts identified Europe as the region carrying the greatest exposure to the effects of a U.S. diesel export ban.
Is an export ban currently the official policy of the Trump administration?
Not yet. While President Donald Trump supports an export ban and Treasury Secretary Scott Bessent stated the administration is studying its feasibility, other officials like Interior Secretary Doug Burgum and Energy Secretary Chris Wright have argued against it.
