Diesel prices are at all-time highs and panic has set in. Several Republican senators from Midwest farm states in competitive midterm races are calling on the administration to ban diesel exports. Even President Trump expressed support for the proposal. Lawmakers desperately want to curb the pain felt at the pump and throughout the agricultural industry. It’s understandable. But the knee-jerk reaction to “do something” by banning diesel exports is ill-advised and will backfire.
Logic might dictate that preventing all diesel from leaving our borders will allow it to fulfill our needs first. It just doesn’t work that way. Petroleum is a global market.
The U.S. fuel network is not set up to distribute gas throughout our country. Nearly 55% of the nation’s refining occurs along the Gulf Coast, producing more than enough diesel for the region. But much of the surplus must be exported as there are very few avenues to ship it to other domestic markets, like the east and west coasts, where it is needed. Both those areas rely on imports to satisfy their diesel and other gasoline demands. The U.S. has too few pipelines and cargo capabilities to transport energy to these locations. And storage is not an option; there is only so much space.
Refineries cannot flip a switch to produce only the diesel needed at a given time. Processing a barrel of crude oil produces certain proportions of gasoline and other distillates (like diesel and jet fuel); refiners are limited in their ability to adjust those proportions. The only way to curtail a diesel surplus would be to cut back on crude altogether, a move that would be economically devastating.
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