Oil & Gas Industry's Workings to Stave Off Diesel Export Ban

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Shortly after Trump made his suggestion Tuesday, Mike Sommers, chief executive of the American Petroleum Institute, the industry’s top lobby, issued a statement condemning the move. He said restricting U.S. exports “would only compound the problem” of rising diesel costs. API also issued a press release on the dangers of an export ban.

“Restricting U.S. diesel exports would wreak havoc on fuel markets at home and abroad, destabilize refinery operations and deepen a global refining crisis already putting upward pressure on U.S. prices,” the group said.

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Chevron CEO Mike Wirth, Phillips 66 CEO Mark Lashier and other senior executives started calling their contacts in the administration to push back on the idea of a ban, according to people close to the situation. The executives have different relationships with different members of the administration and they made their discontent known.

ExxonMobil and Valero are among the other companies involved in the effort, according to people aware of the interactions. The industry has also been able to rely on Sen. Ted Cruz of Texas and Louisiana Republicans.

The full-throated offense comes as the industry sees an existential threat to its business. Oil-and-gas producers sell a large chunk of their product to refiners, who then turn it into fuel and export it. Bottling up diesel production risks congesting the whole energy chain—and could cost the industry billions of dollars.

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Oil lobbies and executives have been gearing up for a potential ban on energy exports since the beginning of the Iran war. They first anticipated restrictions on crude exports. In the end, it is diesel, whose price has exploded, that has become a target of the administration.

On Tuesday night, after U.S. oil executives relayed their fears to Trump officials, Energy Secretary Chris Wright called the CEOs of multiple U.S. oil companies and conveyed he favored a measure that would fall short of an export ban while satisfying Trump’s desire to lower diesel prices, according to people close to the industry.

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“The Trump administration, including Secretary Wright, continue to work closely together as they consider a variety of options to help lower energy costs for the American people,” a spokesman for the Energy Department said. “Ultimately, President Trump will make the final decisions.”

The industry doesn’t expect a ban to be imminent and still hopes to kill the idea. It is urging the administration to relax authorization requirements for Jones Act waivers, which allow fuel to be transported between U.S. ports. It is hoping Trump can push China to churn out and export more fuel, and it is encouraging Congress to implement a fuel-tax holiday. The federal tax is 18.4 cents on a gallon of gasoline and 24.4 cents on diesel.

Executives have also raised the possibility of adjusting fuel-blending requirements under the U.S. Renewable Fuels Standard that some estimate could lower gasoline prices by 40 cents a gallon. But that is a political impossibility, they said, given that reducing the required amount of ethanol in fuel could wreak havoc on core constituencies in Iowa and other Midwestern states whose economies lean heavily on corn.

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The industry believes Bessent doesn’t fully support banning exports. Wright and Interior Secretary Doug Burgum have both publicly opposed a ban.

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