Politicians, Energy Trade Groups Clash Over U.S. Diesel Ban

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The Center Square) - A bipartisan group of elected officials and energy trade associations squared off Monday over a potential Trump administration ban on U.S. diesel exports as prices for the fuel reached unprecedented levels and farmers, truckers, and consumers braced for the economic fallout.

The national average price of a gallon of diesel rose to over $6.50 a gallon Monday, an all-time record high, while independent trucking groups warned of widespread operator bankruptcies and called for restrictions on U.S. exports along with the suspension of federal fuel taxes. The soaring diesel prices have ignited a firestorm of online discussion, and some independent truckers are threatening a nationwide "park it" strike on October 1st.

Louisiana Gov. Jeff Landry followed up on his X post last week calling for a 90-day moratorium on U.S. diesel exports, saying Monday in an interview on CNBC's Squawk Box that "Americans are subsidizing Europe's problems" by shipping “massive amounts” of U.S. diesel across the Atlantic to fill market shortages caused by the wars in Ukraine and Iran.

The Louisiana governor also pushed for the Trump administration to make the Small Refinery Exemption permanent. Issuing such a waiver would free independent refiners from expensive renewable biofuel blending rules, which Landry said is necessary to provide immediate relief to independent farmers now facing soaring costs at harvest time.

Farm-state Senator Chuck Grassley joined the call for a diesel ban during his weekly radio show on Friday, warning that food prices could spike if the U.S. continues exporting too much fuel.

Two days before Grassley's radio address, Democrat Josh Turek, in his race against Republican Rep. Ashley Hinson for the seat of retiring Iowa Senator Joni Ernst, called for a national ban on diesel exports, a temporary suspension of the federal gas tax, and further withdrawals from the Strategic Petroleum Reserve to alleviate shortages. “Iowans are hurting, and it’s time to put an embargo on diesel exports. And ultimately, end this war,” Turek posted on X.

Energy industry trade organizations maintain refiners cannot simply "dial down" diesel production while also maintaining output of other fuels, however, arguing that an export embargo would inadvertently trigger a nationwide gasoline shortage.

Because U.S. diesel production at about 5.3 million barrels per day exceeds national consumption, currently approximately 3.6 million barrels a day, an export embargo means excess a daily supply surplus on the Gulf Coast totaling nearly 1.7 million barrels, an unmanageable amount, according to a national trade association representing U.S. refiners, Washington DC-based American Fuel and Petrochemicals Manufacturers.

Because the two motor fuels are refined together, a forced cutback in diesel production due to insufficient storage capacity would simultaneously choke off gasoline supplies, driving prices higher for all drivers, according to the trade association.

Louisiana Mid-Continent Oil and Gas Association President Tommy Faucheux said Monday that regional pipeline infrastructure is already at the structural limits of planned usage. “Pipelines for domestic diesel transportation are already at max capacity. Without available capacity to redirect supply, halting the export of American diesel would force refineries to reduce production which would also decrease the production of gasoline,” Faucheux said.

U.S. Energy Secretary Chris Wright downplayed the viability of a federal diesel ban during a CBS Face the Nation interview in early September. While conceding that current diesel market conditions are incredibly "challenging," Wright reiterated the Trump administration’s position that an export ban would be a counterproductive "unforced error" that would leave refiners with nowhere to send excess supply.

Last week, Wright told POLITICO at the G20 energy ministerial in Houston that the White House is instead focused entirely on increasing supply, potentially using Cold War-era Defense Production Act funds to help existing refiners expand their capacity.