Senate Majority Leader Thune Open to Exploring Diesel Export Ban

U.S. Senate Majority Leader John Thune (R. -S.D.) said Tuesday he is “open to exploring” an export ban on diesel fuel in a bid to increase supply and lower record U.S. retail diesel prices.

“The export ban honestly makes probably more sense to me,” said Thune in response to a reporter’s question on how to ease all-time high prices including a federal tax suspension on the fuel.

Diesel is heavily used in machinery for the agricultural sector, which is also a key constituent in Thune’s home state of South Dakota.

Thune said he would look at “all the options,” including a diesel export ban by the Trump administration.

“It is a commodity now that I think we’re exporting, and if we need more supplies in this country, and if that would take pressure off of prices, I’m open to exploring it,” he said.

Thune added that he does not know “what the administration is thinking” on an export ban.

The U.S. average diesel retail price rose to a fresh all-time high of $6.27/gal on Tuesday, well above $3.69/gal from a year ago.

The U.S. on average exported a record 1.8 million b/d of distillate fuel — comprising diesel and heating oil — during the week of Aug. 21, while total refiner utilization has been hovering close to 100% in the last month, according to the Energy Information Administration’s weekly estimates.

The U.S. has never imposed an export ban on refined products like diesel and gasoline, although the government had prohibited exports of crude oil for 40 years until the restriction was lifted in 2015.

Analysts said any attempts by policymakers to disrupt market forces will fail and consumers will eventually pay higher prices as refiners produce less diesel.

After the Nixon administration imposed a gasoline price ceiling in August 1971, refining companies responded by producing less, creating severe gasoline shortages and long lines at gas stations.

Geographical constraints could also render any export restrictions ineffective. The U.S. Gulf Coast accounts for 55% of the nation’s refining capacity and almost all U.S. gasoline exports. With virtually no incremental capacity to move fuel by pipelines or vessels, redirecting a large volume of products from the Gulf Coast to other parts of the U.S. is not feasible.

–Reporting by Frank Tang, frank.tang@dowjones.com; Editing by Michael Kelly, mkelly@opisnet.com

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