WSJ: Banning Diesel Exports a bad idea

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A diesel self-embargo is a bad idea for many of the same reason Republicans criticized Joe Biden’s “pause” on new liquefied natural gas exports. The U.S. is the world’s largest exporter of diesel, selling about 1.5 million barrels abroad a day, mostly from the Gulf Coast. Proponents of a ban say this would increase U.S. supply and thus push down prices.

But there’s not enough pipeline capacity to move the diesel in the Gulf Coast that is normally exported to the Northeast and California, or for that matter to significantly boost flows to the Midwest. A ban on exports would increase global diesel prices, which would smack Americans living in coastal areas that rely on imports.

Diesel would pile up in Gulf Coast storage, prompting refineries to reduce run rates. That would lower the production of gasoline and jet fuel, whose prices would rise. Limiting exports would also signal the U.S. is an unreliable trade partner and might prompt allies to diversify diesel supply, perhaps by buying more from China. If Democrats win the White House in 2028, they’ll use GOP support for a diesel export ban to justify reinstating the Biden LNG embargo.

Americans are feeling the squeeze of higher fuel prices, and the pain is especially acute for farmers who use diesel to power equipment. Diesel prices have surged amid supply disruptions from the Iran war, and Russia’s new ban on diesel exports.

But if Republicans want to reduce diesel prices fast, they’d suspend or scrap the renewable fuel standard (aka ethanol mandate). The biofuel blending requirements add between 30 and 40 cents to every gallon of diesel. Refineries have to blend increasing amounts of biofuels into products or buy regulatory credits to comply with quotas.

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