"Refining" has become a global energy bottleneck—how close is the U.S. to imposing an export ban?

This wave of investment doubled Middle Eastern diesel exports between 2017 and 2025, lifting the region’s share of global diesel exports to 19% and propelling it past North America to become the world’s largest diesel exporter. Over the same period, Russia boosted its diesel exports by one-third through upgrades to existing refineries. However, following the U.S.-Israeli joint military strike against Iran in February, traffic through the Strait of Hormuz was disrupted, forcing Kuwait, the UAE, and Iraq to sharply cut exports. Escalating Houthi attacks have further constrained diesel exports from Saudi Aramco’s Red Sea refineries—the primary alternative route bypassing the Strait of Hormuz. Meanwhile, sustained Ukrainian drone strikes on Russian refineries have proven highly effective, nearly halting Russia’s diesel exports altogether. David Martin, Senior Oil Markets Analyst at the International Energy Agency (IEA), stated: “We are witnessing what may be the tightest diesel market ever recorded.” Western refining capacity insufficient to fill the supply gap Large-scale refining investments in the Middle East and Russia have long suppressed profit margins for Western refiners, leading to a persistent decline in capital investment—and leaving them ill-equipped to respond during this crisis. Alan Gelder, Senior Vice President for Refining, Chemicals, and Oil Markets at consultancy Wood Mackenzie, noted that when national oil companies build refineries, return on investment is often not the top priority; governments instead emphasize job creation and energy security. By contrast, Western major oil companies have built no new refineries in nearly three decades, and over ten refineries in the U.S. and Europe have closed since 2015. Gelder observed: “We’re seeing major oil companies actively reducing their exposure to this sector, as actual returns on capital have consistently been poor.” Gelder further cited an industry adage: “How do you turn a large fortune into a small one? Build a refinery.” Currently, Western refineries are operating near full capacity and have shifted production toward diesel—reducing gasoline and jet fuel output—but still cannot effectively offset the supply shortfall left by the Middle East and Russia. The export ban debate: easing domestic pain—or harming the globe? Soaring domestic fuel prices have intensified calls within U.S. political circles for a diesel export ban—adding further uncertainty to this global supply tug-of-war. Trump recently attributed soaring diesel prices primarily to the Russia-Ukraine war, stating, “Global diesel price increases stem mainly from the Russia-Ukraine war—not Iran.” Yet IEA data shows diesel volumes blocked in the Persian Gulf are roughly triple the volume lost due to Russia’s disruptions—a clear divergence in assessment. Analysts warn that if the U.S. imposes a diesel export ban, prices elsewhere would surge further—and could prompt other major exporters to follow suit, worsening an already severely strained global diesel market.

If the U.S. bans diesel exports, will Europe bear the brunt?

Global diesel prices have surged to record highs, and the U.S. government is now considering a diesel export ban—a potential policy shift 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 warned that a full export ban would cause both domestic U.S. gasoline prices and overseas diesel prices to spike sharply. The report assessed the probability of a full ban as low, but acknowledged that partial restrictions or phased regulatory measures remain realistically possible. Why have diesel prices soared to historic extremes? Tight global diesel supply 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 offline—partly because facilities lie inside the Strait of Hormuz and thus face logistical hurdles, and partly due to physical damage—causing regional diesel exports to fall by roughly 500,000 bpd year-on-year. Meanwhile, about 3.5 million bpd of Russian refining capacity has been taken offline by drone strikes, slashing Russian 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—roughly 15% of the global seaborne diesel market’s average daily supply of 8 million bpd. On the pricing front, NYMEX heating oil futures hit a record $5.26 per gallon ($220 per barrel) on September 15; U.S. retail diesel averaged a record $6.52 per gallon. Measured as the distillate crack spread versus WTI crude, the current spread stands at approximately $105 per barrel—four times the median level over the past 15 years. In response to mounting price pressure, the U.S. government has rolled out several emergency 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 export ban transmit impact 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 roughly 16.5 million bpd of crude oil, producing about 5.1 million bpd of diesel. Domestic consumption stands at 3.9 million bpd, leaving ~1.2 million bpd available for net export—specifically, ~1.4 million bpd exported (primarily from the Gulf Coast), and ~200,000 bpd imported (mainly into the U.S. East Coast). Morgan Stanley estimates that if the full 1.4-million-bpd diesel export flow were halted, domestic supply would improve initially, pushing consumption up 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 along the Gulf Coast (PADD 3).

TotalEnergies CEO Warns US Diesel Export Ban Could Raise Gasoline Prices

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TotalEnergies CEO Patrick Pouyanné warned that a proposed US diesel export ban could backfire by raising domestic gasoline prices and reducing refinery throughput. The policy would disrupt European supply chains, forcing governments to utilize strategic reserves amid potential consumer backlash.

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