If the U.S. bans diesel exports, will Europe be the biggest victim?

Global diesel prices have surged to record highs, and the U.S. government is considering a diesel export ban—a potential policy that would profoundly reshape the global energy market. Trump has recently voiced support for the idea of banning diesel exports. According to Wind Trading Desk, Morgan Stanley’s research report dated September 23 noted that if a full export ban were implemented, both domestic U.S. gasoline prices and overseas diesel prices would rise sharply. The report also assessed that the probability of a full ban remains low, though partial restrictions or phased regulatory measures are realistically possible. Why have diesel prices soared to historic highs? Global diesel supply tightness has persisted for months, with price pressures converging along two parallel fronts. Approximately 1.5 million barrels per day (bpd) of refining capacity in the Middle East is effectively unusable—partly because facilities located within the Strait of Hormuz face logistical hurdles preventing export, and partly due to damage-induced shutdowns—causing regional diesel exports to fall by roughly 500,000 bpd year-on-year. Meanwhile, around 3.5 million bpd of Russian refining capacity has been taken offline due to drone strikes, reducing its diesel exports by another ~800,000 bpd year-on-year. Combined, the supply shortfall from Russia and the Middle East totals 1.3 million bpd—about 15% of the global seaborne diesel trade volume of 8 million bpd. On the pricing front, on September 15, NYMEX heating oil futures hit a record high of $5.26 per gallon (equivalent to $220 per barrel); U.S. retail diesel averaged a record $6.52 per gallon. Measured as a spread over WTI crude, the U.S. distillate crack spread currently stands at ~$105 per barrel—four times its 15-year median. In response to mounting price pressure, the U.S. government has already taken several measures: temporary waivers of the Jones Act (extended through November 15), repeated exemptions from EPA fuel standards, nationwide waivers of federal truck driver hours-of-service rules, and large-scale releases from the Strategic Petroleum Reserve. How would a full ban transmit to the U.S. domestic market? Understanding the potential impact of an export ban requires first clarifying the U.S. diesel supply-demand structure. U.S. refineries process approximately 16.5 million bpd of crude oil, producing about 5.1 million bpd of diesel. Domestic consumption stands at 3.9 million bpd, leaving roughly 1.2 million bpd available for net export—specifically, exports of ~1.4 million bpd (primarily from the Gulf Coast), offset by imports of ~200,000 bpd (mainly into the U.S. East Coast). Morgan Stanley estimates that halting the full 1.4 million bpd of diesel exports would initially improve domestic supply, potentially lifting consumption by ~200,000 bpd toward its five-year average. Assuming the Jones Act waiver remains in effect and East Coast import demand is met by Gulf Coast supply, a surplus of ~1 million bpd would still accumulate—concentrated in the Gulf Coast region (PADD 3).

Trump says he is 'very seriously considering a diesel export ban'; Goldman Sachs analyzes the 'five impacts' of such a ban.

Specific estimate: Assuming storage tanks still have spare capacity, each week the ban remains in place would reduce the U.S. retail diesel price by approximately $0.25 per gallon—nearly 4% off the current level of $6.50 per gallon. The logic chain is: export disruption → domestic inventory buildup → downward pressure on wholesale prices → lower retail prices. Impact Two: The longer the ban lasts, the more expensive gasoline becomes. This is the most noteworthy counterintuitive effect highlighted in the bank’s analysis. Diesel, gasoline, and jet fuel are highly interlinked in the refining process, with limited flexibility to shift output ratios. Once diesel inventories approach tank capacity limits, refiners will be forced to cut operating rates—not only reducing diesel output but also simultaneously constraining gasoline and jet fuel supplies. The bank estimates that once diesel tanks are full, each additional week of the ban would exert upward pressure of ~$0.30 per gallon on U.S. retail gasoline prices. Under Goldman Sachs’ base case—assuming a halt to 1.6 million bpd of diesel exports—the entire U.S. diesel storage system would fill up in 9–10 weeks. However, Goldman notes that refiners would likely begin cutting output *before* tanks reach full capacity; thus, upward pressure on gasoline prices would emerge earlier than this timeline suggests. Impact Three: Diesel prices rise outside the U.S. The ban’s shockwaves won’t stop at U.S. borders. Europe and Latin America (e.g., Brazil, Mexico) are the primary destinations for U.S. diesel exports. The bank estimates that each week the ban remains in place would lift European wholesale diesel (ARA diesel) prices by ~$3 per barrel—nearly 2%. However, Europe’s strategic petroleum reserves (SPR) hold substantial diesel stocks that could offset roughly half of this price increase. As of end-June, OECD member countries in Europe still held 190 million barrels of strategic diesel reserves—equivalent to nearly 500 days of U.S. diesel imports. Goldman Sachs also notes that the supply shock would quickly spill over into Asia—as Latin America and Europe compete for diesel supplies from countries like India. Impact Four: U.S. diesel prices rebound after the ban is lifted. The price suppression caused by the ban is not permanent. Goldman Sachs points out that once the ban is lifted, U.S. diesel prices will realign with those in Europe, Latin America, and Asia—leading to upward pressure on U.S. diesel prices and downward pressure overseas. Yet the bank stresses that post-ban global refined product prices will remain higher than the counterfactual scenario where no ban was ever imposed. The reason: temporary reductions in U.S. refining capacity during the ban period will leave global cumulative inventories below what they would have been absent the ban—a deficit unlikely to be closed quickly. Impact Five: Goldman Sachs reaffirms its long European gasoline trade. Based on the above analysis, Goldman Sachs reaffirms its hedge against geopolitical risk: going long 2027 European gasoline (e.g., EBOB Jun27). Goldman cites three reasons: First, the gasoline market is tightening rapidly—high diesel prices have already prompted global refiners to shift production from gasoline to diesel; if U.S. diesel export restrictions push overseas diesel prices even higher, this shift will intensify further. Second, should the U.S. extend export restrictions to gasoline in the future, gasoline markets outside the U.S. would tighten further; even if only diesel exports are restricted, once U.S. diesel tanks hit capacity and refining capacity declines, global gasoline markets will likewise tighten upon the ban’s removal.

Morgan Stanley: Diesel Export Ban Could Push Up U.S. Gasoline Prices

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Morgan Stanley warns a U.S. diesel export ban could spike gasoline prices by forcing refinery cuts due to storage limits. Energy sectors and the White House oppose the measure, citing supply shocks and rising costs.

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