ROI-Trump's diesel export dilemma — Good politics, bad economics: Bousso

Soaring fuel costs are increasing pressure on US President Donald Trump to curb diesel exports ahead of November's ​midterm elections. But what may seem like an easy fix could unleash a chain reaction that ultimately leaves American consumers and the global ​economy worse off. Surging energy prices since the start of the Iran war in late February ‌are setting ​off alarm bells in the White House. While politically sensitive gasoline prices remain elevated at nearly $4.50 a gallon, attention in recent weeks has shifted to diesel, which has climbed to a record $6.50 a gallon, squeezing trucking, farming, manufacturing and other sectors that rely on the fuel to keep goods moving.

Trump on Tuesday said he backed the idea of a ban on diesel exports, which some Republican lawmakers, particularly those representing agricultural states, have called for. US Treasury Secretary ‌Scott Bessent said the administration was examining whether a full or partial ban would work. Some senior administration officials, including Energy Secretary Chris Wright and Interior Secretary Doug Burgum, have in recent weeks nevertheless expressed doubts about whether such a move would work.

Yet with fuel costs becoming a growing political liability and midterm elections fast approaching, the temptation to seek a politically popular “quick fix” may prove difficult to resist – especially as the president’s poll numbers sink to new lows. Trump has the authority to restrict exports temporarily under emergency powers. He would certainly not be the first president to intervene – or contemplate intervening – in energy markets. The US prohibited crude ‌oil exports for four decades following the 1973 oil crisis, while former President Joe Biden's administration considered restricting diesel exports in 2022 after Russia's invasion of Ukraine sent fuel markets into turmoil.

The trouble is that a diesel export ban would likely aggravate the very problem it is designed to solve. KEEPING ‌UP WITH THE JONES ACT

The current fuel crunch is almost entirely conflict-driven. The Middle East and Russia used to account collectively for roughly a fifth of global seaborne exports of diesel. But the Iran war and the resulting disruption to shipping through the Strait of Hormuz have removed a sizeable portion of global refining capacity and diesel supplies.

This squeeze intensified in July when Russia, traditionally one of the world's largest diesel exporters, halted shipments following months of Ukrainian drone attacks that crippled large parts of its refining sector. Half of Russia's six top diesel-producing refineries significantly cut back or completely halted output in September due to damage sustained in drone attacks, Reuters reported.

The Trump administration has already tried several measures to ease domestic prices, with limited success. In March, Washington ⁠issued a waiver to ​the century-old Jones Act, which requires cargo shipped between US ports to travel on ⁠vessels that are US-built, US-owned, US-flagged and largely US-crewed.

The waiver, which expires on November 15, was designed to make it easier for refiners along the US Gulf Coast refining hub to supply diesel to consuming regions on the East and West coasts. But the results have been negligible. Trump has also sought relief abroad by encouraging Ukrainian President Volodymyr Zelenskiy to halt strikes on ⁠Russian energy infrastructure. Those efforts have produced little progress, with attacks continuing in recent days.

US DIESEL SURPLUS The US has emerged as one of the few suppliers capable of helping fill the gap created by the loss of Middle Eastern and Russian fuel, taking advantage of huge margins in the process. Total US oil exports have surged by over ​20% since March, compared with the 2025 average to 9 million barrels per day (bpd), according to Kpler.

That role, however, has come at a cost. Those enormous exports are limiting the amount of product available domestically. US diesel inventories have fallen to their lowest level for this time of ⁠year in more than four decades and stand about 13% below last year's levels. The decline is especially concerning because stockpiles would normally be building ahead of autumn refinery maintenance and the winter heating season.

The prospect of entering winter with unusually tight inventories has reinforced calls for an export ban. At first glance, the idea appears compelling. US refiners produced almost 5 million bpd of diesel ⁠last ​year, while domestic consumption was 3.9 million bpd.

But that apparent surplus is precisely why a ban would backfire. Modern refining systems are designed to serve both domestic and international markets simultaneously. Gulf Coast refiners optimise operations based on global price signals, moving diesel, gasoline and jet fuel to whichever market values them most highly.

Initially, an export ban would direct more fuel into domestic markets and storage tanks, temporarily depressing prices. Once those inventories filled, however, refiners would have little choice but to reduce processing rates because they would no longer be able to sell surplus diesel abroad. The consequence would be lower production of not only ⁠diesel but also of gasoline, jet fuel and other products.

In other words, a diesel export ban would not just fail to create more fuel, it could eventually discourage production. That reality helps explain why both the Biden and Trump administrations have approached the idea cautiously.

The political risks extend beyond ⁠the pump. Restricting exports could undermine America's reputation as a reliable energy supplier just as ⁠Washington seeks to promote its energy dominance agenda. It would also strain relations with allies and customers, particularly in Europe and Asia, that have become increasingly dependent on US fuel. The case against a diesel export ban thus seems pretty clear-cut, but whether the administration can withstand the political pressure to impose one is far less obvious.

(The opinions expressed here are those of Ron Bousso, a columnist for Reuters.) Enjoying this column? Check out Reuters Open Interest (ROI), your essential ‌new source for global financial commentary. Follow ROI on LinkedIn, ‌and X.

And listen to the Morning Bid daily podcast on Apple, Spotify, or the Reuters app. Subscribe to hear Reuters journalists discuss the biggest news in ​markets and finance seven days a week. (Ron Bousso; Editing by Marguerita Choy)