Morgan Stanley has cautioned that halting US diesel shipments abroad could drive gasoline costs upward. The financial institution anticipates that domestic storage facilities would reach capacity within weeks, compelling refineries to decrease production.
A comparable warning was delivered by Goldman Sachs on Wednesday, coinciding with President Donald Trump’s consideration of restrictions on exports to help cool record-high diesel expenses.
Record Pump Prices Put a Diesel Export Ban on the Table
According to AAA figures cited by Bloomberg, diesel prices have jumped 74% since February 27, which was the day before the war in Iran began. On Tuesday, the fuel reached an all-time high of $6.52 a gallon.
Gasoline has also experienced increases, with AAA noting a national average of approximately $4.47 on September 24. That figure represents roughly a 50% rise compared to the $2.98 average recorded on February 26 before the conflict started.
Amid these soaring rates, Treasury Secretary Scott Bessent stated on Tuesday that the Trump administration is evaluating whether stopping fuel shipments overseas could offer relief. President Donald Trump indicated that he supports implementing an export prohibition.
“We’re examining whether it’s feasible in terms of the overall refining capacity and whether a full or partial ban would work,” Bessent said.
These proposals have created divisions within the administration. Interior Secretary Doug Burgum and Energy Secretary Chris Wright have both spoken out against a ban. CNBC reported that in addition to the war in Iran, Ukrainian attacks targeting Russian refineries have previously forced Moscow to enact its own ban on diesel exports.
Why Refiners Would Pull Back if Diesel Stays Home
However, would such a restriction genuinely help lower prices? In a September 23 analysis note, Morgan Stanley analysts led by Martijn Rats detailed why it might fail to do so.
“A diesel export ban could have the counterintuitive effect of an increase in gasoline prices if US refiners cut runs,” the analysts said.
The financial institution projects that such a ban would compel refineries to reduce processing operations by roughly 2 million barrels daily. Even if processing facilities adjusted their yields to favor gasoline, the production of that specific fuel would still decline by about 650,000 barrels per day.
The analysts project that domestic diesel costs would decline under a ban, while expenses for international buyers would climb. They pointed to Europe as the territory facing the highest vulnerability.
Implementing a ban is not currently the bank’s primary expectation. Even so, analysts anticipate that petroleum prices will remain erratic as the discussion persists.
Daan Struyven, co-head of commodities research at Goldman Sachs, shared a similar perspective during an appearance on Bloomberg Television, noting that cheaper diesel would remove the incentive for refiners to maintain high production levels.
“And because gasoline and diesel are usually produced together as a bundle with some flexibility, it would likely reduce the availability of gasoline,” he said.
Struyven emphasized that the specific implementation of the policy would be crucial, noting considerations such as opting for a ban versus a quota, and deciding whether to introduce incentives that keep refiners operational.
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