Diesel prices have broken through $6 for the first time in history! Will the US implement major export control measures?

For the first time, the retail price of diesel in the United States broke through $6 per gallon, setting a record. This has caused energy-driven inflationary pressures to rise sharply on the eve of the midterm elections, and has also brought a policy option that has long been considered a "last resort" back into the spotlight—restricting or even banning the export of U.S. refined petroleum products.

According to data from the American Automobile Association (AAA), the national average price of diesel has reached $6.0556 per gallon, with prices in California approaching $8. Meanwhile, gasoline prices have also surpassed $4 per gallon, reaching a record high for this period. As reported by Bloomberg on September 11, with only about 50 days left until the November midterm elections, high oil prices are eroding consumer purchasing power and are spreading to the wider economy. The Trump administration currently has few policy tools left, and while export controls are widely considered a "bad policy" by the industry, they continue to have a significant impact.

The consulting firm Rapidan Energy Group estimates the probability of export restrictions being implemented at 35%. Energy Secretary Chris Wright recently did not explicitly rule out this possibility, while Interior Secretary Doug Burgum stated at the Republican National Committee convention that "all options are being considered," but also acknowledged that export controls have historically driven up domestic prices. Most experts warn that banning exports would not only fail to lower oil prices but could actually have the opposite effect, severely impacting the global energy market.

Why prices hit record highs: Geopolitical conflicts compounded by supply chain disruptions

The historic breakthrough in diesel prices stems from the simultaneous superposition of multiple geopolitical shocks.

The war with Iran and the disruption of shipping in the Strait of Hormuz have triggered the largest energy supply disruption in history. Meanwhile, Ukraine's months-long drone strikes on Russian oil refineries have forced Russia to impose a diesel export ban. The fighting near the Strait of Hormuz and the Bab el-Mandeb Strait in the Middle East escalated further this week, with the US and Iran appearing to be preparing for a protracted conflict, meaning that high energy prices could persist for an extended period.

Diesel fuel is a "basic fuel" for the global economy, widely used in power generation, home heating, agricultural machinery, and trucking. While the average American consumer has limited direct contact with diesel on a daily basis, price increases will be passed on to end consumers through food, logistics, and construction costs. Demand for heating and agricultural fuel will also seasonally increase in the fall, further exacerbating the supply-demand imbalance.

High oil prices are particularly sensitive to the political impact on Trump's Republican Party. In Maine, the highest percentage of households in the nation rely on heating oil for winter; in agricultural states like Ohio, Kansas, and Iowa, diesel costs are directly linked to agricultural production costs. Scott Dane, executive director of the American Loggers Council, called on Trump to halt diesel exports this week on Fox Business, stating:

“It costs $1,350 to fill up a logging truck with gas. We’re running out of steam.”

Why are export controls being put on the agenda? The policy toolbox is almost exhausted.

U.S. refineries are currently operating at near-record rates. According to Bloomberg, approximately 130 refineries across the U.S. processed nearly 18 million barrels of crude oil per day into gasoline, diesel, and jet fuel last week. However, this high output has had little effect on replenishing inventories or lowering prices—in a market environment where global geopolitics dominates pricing, increased production is insufficient to offset supply shocks.

The report points out that the Trump administration has taken a series of measures this year, including exempting certain provisions of the century-old Jones Act, to facilitate crude oil transportation. However, with production capacity nearing its limit and existing policies having limited effectiveness, the scope for executive action is narrowing. The White House now effectively has only two options left: further utilizing the strategic petroleum reserve or implementing an export ban.

The approximately 3 million barrels of refined petroleum products exported daily are the core target of this ban discussion. This figure represents a significant proportion of total US production and is a crucial source of global supply.

The Cost of the Ban: Experts Warn It Could Backfire

Despite the political appeal of export controls, the energy industry and independent research institutions almost unanimously believe that the measure will have the opposite effect of its original purpose.

The American Petroleum Institute (API) clearly stated in a 2022 letter to then-Energy Secretary Jennifer Granholm that export restrictions would drive up domestic oil prices. A report released earlier this year by the Center for Strategic and International Studies (CSIS), as well as research on crude oil export restrictions by the Dallas Federal Reserve and Columbia University's Center for Global Energy Policy, all reached the same conclusion.

Structural issues are the core obstacle. U.S. refining capacity is highly concentrated along the Gulf Coast, and its infrastructure was designed for export markets. Pipelines that transport products from the region to the rest of the country are currently operating at or near full capacity, and the tight global tanker capacity also limits the flexibility of domestic allocation.

The Center for Strategic and International Studies (CSIS) stated in its report: "Faced with an unprofitable (or even loss-making) operating environment, Gulf Coast refiners will inevitably drastically reduce refining activities, process less crude oil, and export less refined products."

This will result in "domestic gasoline supply falling below levels not seen before the ban, partially or even completely offsetting initial inventory buildup and putting upward pressure on prices that the ban was intended to suppress."

The global market's ripple effects: Europe and Asia bear the brunt.

Currently, statements from senior Trump administration officials are deliberately keeping room for flexibility.

When asked about the export ban recently, Energy Secretary Chris Wright did not explicitly rule it out, but then shifted the focus to expanding production and ensuring energy flow, which is consistent with Trump's overall energy policy direction of "reducing regulation and releasing capacity".

Interior Secretary Doug Burgum said at the Republican National Committee convention that "all options are being considered," while also acknowledging that export controls have historically driven up domestic prices.

Rapidan Energy Group estimates the probability of the current export restrictions being implemented at 35%. While this probability is low, for the energy industry, which has long regarded export controls as a policy no-go zone, the mere existence of any possibility is enough to trigger high market vigilance.

Once the United States implements export controls, the impact will quickly spread to the global energy market.

Europe is already under pressure on fuel supplies due to the Russia-Ukraine conflict, and disruptions to US exports will further exacerbate its predicament. In Asia, the Middle East conflict has already led to supply shortages, and dependence on US refined petroleum products has continued to rise this year, posing a similar serious risk.

Historically, the United States has implemented energy export controls before—between 1975 and 2015, the United States imposed a 40-year ban on crude oil exports.

However, it was precisely the eventual lifting of this ban that enabled the United States to grow into a major global energy supplier and also constitutes a significant obstacle to current restrictions on refined petroleum product exports. The export ban would directly impact Trump's "energy dominance" strategy, weakening the United States' position and influence as a global energy supplier.

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