Rumor has it that Trump plans to impose a 90-day ban on diesel exports: a wave of global oil grabbing is on the rise, and allies are pressuring oil prices to fuel

The Zhitong Finance App learned that foreign media quoted unnamed sources as reporting that the US government is preparing a 90-day ban on diesel exports. The legal procedures for this ban are still unclear, but US President Trump is inclined to launch it before the end of this week. If implemented, it would be the most comprehensive move the Trump administration has taken to date to calm the sharp rise in fuel prices. It also highlights the pressure the Republican Party is under before the November midterm elections — its control of Congress is under threat. According to reports, once the ban is implemented, it will force Brazil, Britain and other countries to scramble to buy diesel, further driving up prices that are already close to records in the context of the Iran war stifling global supply.

Trump said earlier this week that he has encouraged advisors to support a ban on US diesel exports due to the war between Iran and Ukraine driving diesel prices to record highs. Despite this, people in the energy industry are adamantly opposed to potential export restrictions, saying that they will only lead to short-term price relief, which in turn will lead to higher fuel costs. According to data from the American Automobile Association (AAA), retail diesel prices in the US have soared to an all-time high, breaking through $6.50 per gallon.

After the above report came out, US diesel futures fell sharply. At one point, they fell by more than 7%, then recovered some of their losses; European diesel futures jumped.

America's key allies will be under pressure

If this measure takes effect, Latin America will be hit the hardest in the short term. According to data from energy analysis agencies such as Kpler and Vortexa Ltd., Brazil, a major agricultural country, has been the largest buyer of diesel and similar fuels produced in the United States since September. This coincides with the start of the Brazilian planting season and other harvesting activities. Farmers are using diesel in tractors and trucks, boosting demand.

Chile uses a lot of diesel in mining equipment, and Mexico, the United Kingdom, and the Netherlands also ranked in the top five diesel recipients this month. Meanwhile, the US has become a key supplier, with exports soaring to a record high of nearly 2 million b/d this summer.

Retail diesel prices in the US have soared to record highs of more than $6.50 per gallon, heightening concerns about inflation and triggering calls for restrictions on overseas shipments. Although Trump said he has encouraged advisors to support the export ban and reports that his administration is drawing up a 90-day export suspension plan, the US has yet to announce any restrictions. Energy Secretary Chris Wright said the government is working with refiners to encourage them to voluntarily reduce exports as an alternative to a complete ban.

However, if the Trump administration halts diesel exports, it would be a blow to key allies already bearing the high costs of fuel, food, and consumer goods at a time when the Iran war disrupts global supply chains. As diesel is critical to agriculture, heating, freight, and manufacturing, rising fuel prices are likely to affect the entire global economy. Even the possibility of a ban has boosted Europe's diesel benchmark — low-sulphur diesel futures, while US diesel futures have fallen from a four-year high.

A White House spokesperson did not immediately respond to a request for comment.

After the actual cessation of oil tanker traffic in the Strait of Hormuz this spring, America's role in the global diesel market became even more important. Months later, fuel shipments in the region are still restricted, and the war is still showing no sign of being resolved. U.S. supply became more critical after Russia banned fuel exports in July due to a Ukrainian drone attack on its refinery.

Russia's move has cut off the main sources of diesel in Brazil and other countries, and retail fuel prices in Brazil have just broken away from the highest level in the same period in history. S&P global energy analysts William O'Neil, Brian Stetter, and Debnil Chowdhury wrote in the report that the ban will further disrupt the global fuel market.

“Given Latin America's lack of idle refining capacity and an obvious lack of alternative sources of imports, a sudden complete cutoff of US diesel could lead to a sharp rise in local prices and rising costs for consumers and businesses,” the analyst wrote.

The outlook for Europe is also bleak. Europe has become increasingly dependent on American supplies to make up for lost goods in the Middle East and Russian flows to Turkey.

“Although Europe's risk exposure is proportionately smaller than Latin America, disruptions in US exports to Europe could have a similar negative economic impact and have a ripple effect on other refined oil products, as European refiners will seek to maximize diesel yield to offset losses,” the analyst wrote.

Export patterns are changing month by month, so countries that relied on US diesel in October last year, such as France and Germany, may be caught off guard this year. Overall, export bans will push up global prices and even affect countries that don't import US fuel.

Analyst: Export bans do more harm than good

Trump's consideration of an export ban has a recent precedent. When fuel prices soared during the presidency of former President Joe Biden, his administration also weighed restrictions on overseas deliveries, but eventually dropped after the industry warned that such measures would drive up domestic costs and hurt European and Latin American allies. Kevin Book, managing director of ClearView Energy Partners, said Trump probably had no similar concerns.

“The reality is that President Trump sees these alliances differently and he has room to make an 'America first' decision,” Book said.

US Senate Republican candidates and some Democrats once again called for export bans to lower prices less than two months before the midterm elections, with the aim of providing relief to farmers and homeowners who are being squeezed by high costs.

However, industry officials and analysts have warned that the export ban will do more harm than good; it will push up prices in some parts of the US, and at the same time prevent domestic refiners from processing crude oil. U.S. refineries are concentrated along the Gulf Coast, and the oil pipelines leading to population centers on the east coast are operating at or near full capacity. The market lacks enough tankers to transport fuel to the West Coast, which means West Coast prices are likely to rise despite export restrictions.

“A ban on diesel exports would be counterproductive. This means lower US fuel production, tighter supply, lower energy security, and Americans facing higher prices,” said Geoff Moody, senior vice president of government relations and policy at the American Fuel and Petrochemical Manufacturers Association, an industry organization representing refiners. “There is no benefit, which is why both governments have repeatedly chosen to oppose fuel export bans.”

The exact form of the ban remains uncertain, including whether to completely stop shipments or include a transition period to allow goods already in transit to reach their destination.

It is also unclear whether the ban will find a solid legal basis. Analysts say the International Emergency Economic Powers Act allows the president to restrict exports in the face of a state of national emergency involving “unusual and special threats,” but any restrictions may immediately be brought to court. However, the consulting agency Rapidan Energy believes that the president's power to ban exports is “unquestionable.”