U.S. President Donald Trump stated that as he faces increasing political pressure, and in order to address the soaring fuel prices before the mid-term elections in November, the White House is still considering whether to implement a ban on diesel exports.
"We are considering it very seriously," Trump told a Fox News reporter while attending the Presidents Cup golf tournament in Illinois on Sunday.
"This sometimes leads to a slight increase in gasoline prices for cars, so we are considering it very seriously. We might do so," he added.
As diesel retail prices rise to new record highs, Trump has previously expressed his support for an export ban. Earlier this month, he said that the government would make a decision "one way or another" regarding whether to implement the ban soon.
U.S. Energy Secretary Chris Wright stated that the White House is considering restrictive measures, rather than a complete ban; Polit Token Issuance reported last week that the Trump administration is preparing a 90-day diesel export ban plan.
If the United States, the world's largest diesel exporter, were to implement a comprehensive ban, it has already sparked strong opposition from the U.S. energy industry. Analysts also warn that such a move could backfire and exacerbate the global fuel crisis.
Amidst the hostile situations between the United States and Iran, as well as Russia and Ukraine, diesel prices have risen significantly. These conflicts have disrupted key oil and fuel trade routes. According to data from AAA, the average price of diesel in the United States on Friday was around $6.50 per gallon, a substantial increase from a year ago, although it is still slightly below the record high of $6.53 set on September 22.
Morgan Stanley's commodities strategists stated that if the United States implements export restrictions, and at a time when supplies from Russia and the Middle East are decreasing, the U.S. has become an important source of diesel supply. Such restrictions could initially push down U.S. diesel prices – "but there may be adverse reactions downstream."
Morgan Stanley strategists said in a research report released on Thursday: "Not only will diesel prices be higher globally, but there may also be a feedback effect on gasoline prices in the United States as refineries adjust their operating rates."
"The biggest problem facing the global petroleum system"
Argus Media Benedict George, the head of European product pricing, stated that if the United States imposes certain restrictions on diesel exports, it could push European diesel prices and the premium over crude oil to "unprecedented new levels." He noted that in the past few months, the United States has supplied approximately half of Europe's diesel imports.
George stated over the phone to CNBC: 'It must be very clear that there are currently no measures in place, and it is also very uncertain whether any measures will be taken, and if so, what those measures will be.'
George said that when communicating with oil traders in Europe, it was clear that most of them suspected that the United States would impose restrictions on diesel exports, as this would be very difficult for American oil companies.
In the United States, soaring diesel prices have also imposed additional financial pressure on farmers and agricultural workers, as well as drivers and families ahead of the mid-November elections.
The American Petroleum Institute ( API ) – a petroleum lobbying organization – quickly raised objections to the prospects of a ban on US diesel exports when Trump initially seemed to support this idea last week.
API CEO Mike Sommers said in a statement: "Restricting U.S. energy exports will only exacerbate the problem - intensifying refining challenges and ultimately harming consumers."
He added, "The answer is more supply and greater flexibility – not new restrictions that would make the difficult situation worse."
Trump previously urged Ukrainian President Volodymyr Zelensky to stop attacking Russian refineries, stating that these attacks "are harming the world" because disruptions in fuel supply continue to support diesel prices in the United States.
Ukraine is concerned that Russia may attack its energy infrastructure again and expects to face an extremely difficult winter; Ukraine has previously regarded Russian refineries as legitimate military targets.
George from Argus stated that Ukraine's attacks on Russian refineries have added a completely new dimension to the global supply tensions, making diesel "the biggest problem facing the global petroleum system, when before it was just one of several very significant issues."
What will happen next with the global diesel supply shortage?
When asked how long the global diesel supply shortage might continue, George stated that the uncertainty is so high that some traders have simply given up trying to predict the market.
"Recently, a trader told me that he no longer bothers to make predictions anymore, because it feels like a waste of energy. You really have no idea what's going to happen," George said.
"We don't know if the United States will impose any restrictions, but I think what everyone is discussing are short-term measures, so at most it would be for two to three months... If it really happens, there will also be a time frame for the U.S. to restrict exports," he continued.
But as for the Russia-Ukraine conflict, who knows? I mean, really no one knows. So far, there is no way to resolve that situation, and the same goes for the semi-blockade of the Strait of Hormuz.
Spencer Kimball and Michael Bloom of CNBC contributed to this report.
