Trump downplays diesel export ban over impact on other fuels

President Donald Trump signalled that his appetite to ban exports of US diesel has cooled given the risk of unintended price spikes, and one of his top deputies indicated Europe might soon put fresh supplies of the fuel on the market.

Trump told reporters Wednesday he is still mulling restrictions on foreign diesel sales with energy secretary Chris Wright and interior secretary Doug Burgum, but acknowledged their warnings a broad export ban could have unintended consequences.

“They sort of think it’ll help diesel, but it might raise the price of other things, and I think we’re in a good place because oil prices are going to start to come down,” Trump said. “It just seems that it would have a negative impact on gasoline, so that would go up a little bit and diesel would come down a little bit, and we think we’re in a very good place.”

Diesel prices have seen a record surge, raising pressure on the White House weeks before midterm elections in which Trump’s Republican Party stands to lose control of Congress. Voters have given Trump poor marks in particular over high costs of living.

Wright on Wednesday pointed to one potential avenue of relief for high prices, saying there would be “announcements from our friends in Europe about new diesel supplies that’ll come to the market.”

White House officials have been considering a range of other, discrete steps to reduce costs that would fall well short of an export ban. Those options include encouraging leaders of some European nations that rely heavily on US diesel to release some of their inventories, people familiar with the matter said, speaking anonymously to discuss internal deliberations.

US officials have complained that European nations have lagged behind the US and Japan in a coordinated release of global oil reserves amid the Iran war. Wright has said several European countries “have released only a fraction of the crude oil and petroleum products they pledged.”

Europe still has significant remaining volumes of emergency oil stockpiles, the International Energy Agency’s head of oil markets said earlier this month.

Asked if Europe had agreed to release diesel stockpiles, Burgum told Bloomberg later Wednesday that he didn’t want to “get ahead of any announcements the Europeans want to make.”

“One thing that’s clear is that while the United States has always been great at managing a strategic petroleum reserve for oil, Europe has done a nice job of maintaining strategic reserves for refined product,” he added. “They certainly would have an opportunity to participate and help drive prices down if they made a significant release voluntarily as part of that.”

Oil executives and energy analysts have warned the Trump administration that any move to curtail diesel exports could escalate prices for gasoline, given refineries produce both fuels in tandem. If refineries are forced to pare their diesel output, they’ve said, gasoline production would also decline, stoking higher pump prices.

“President Trump is looking at every idea that could possibly lower prices, so we have a lot of ideas that are on the table,” Burgum told Fox Business separately. “But, as he’s acknowledged, when you produce diesel out of a refining process that also creates jet fuel and gasoline, if you start restricting supply, you could end up with increased prices for other products.”

Diesel futures markets have whipsawed in both Europe and the US since Trump acknowledged he was considering an export ban earlier in September.

The premium for US-made fuel all but collapsed, indicating expectations for more expensive diesel in foreign markets, before recovering as traders’ fears of a ban eased. Retail diesel prices stood at US$6.41 a gallon, according to the latest figures from auto club AAA, just below all-time record levels set last week.

Top Trump deputies, including Burgum and Wright, have for months highlighted the potential negative consequences of curbs on crude oil and petroleum products.

White House assurances that a ban wouldn’t be imposed are feeding a new, relative sense of calm about the threat, people familiar with the matter say. It’s no longer seen as an option on the table, some of those people said, especially as officials consider a range of other, discrete steps to reduce cost, including short-circuiting diesel excise taxes.

Rapidan Energy Group, an energy consulting firm, earlier slashed its odds of “hard” export restrictions to 40% from 75%, pointing to comments from Trump last weekend stating that a ban could push up gas prices.

Subscribe to our newsletter and get news delivered to your mailbox.