With an election that could decide the fate of the administration just over a month away, diesel prices — a direct hit to household budgets — are soaring. This is the story of the Trump administration in the United States. As of the 25th, the national average retail price of diesel in the U.S. stood at $6.50 a gallon, still close to the all-time high of $6.53 recorded on the 22nd of this month.
Facing what amounts to an emergency, the Trump administration has begun weighing options to restrict diesel exports, or even ban them temporarily. Such a step, if it materializes, could send significant shockwaves through global energy markets. This article walks through why the diesel crunch has hit the U.S. so hard, and why a U.S. diesel export ban matters to Korea. Readers may skip to whichever section interests them.
1. Why diesel prices keep climbing
Analysts point to a global diesel supply crunch. The starting point is two wars — the U.S.-Iran conflict and the Russia-Ukraine war.
The U.S.-Iran war has sharply constrained shipments of heavy, high-sulfur Middle Eastern crude through the Strait of Hormuz. Middle Eastern grades are well suited to producing middle distillates such as diesel and jet fuel, so their absence from the market creates a first-order shortage. The narrowing of the Hormuz shipping route has also made it harder for Middle Eastern producers to run their refineries at full capacity. China, a major energy consumer, imposed export restrictions on petroleum products including diesel on its own refiners in March this year.
On top of that came supply damage from the Russia-Ukraine war. Russia, the world's second-largest diesel exporter, suffered heavy damage to key refineries and has imposed diesel export curbs through the end of next month. As a result, as much as 1 million barrels a day of diesel has effectively vanished from the market, according to S&P Global Energy.
International diesel prices are surging. Ultra-low-sulfur diesel futures on the New York Mercantile Exchange (NYMEX) traded at $4.68 on the same day, up more than 75% from $2.67 on Feb. 27 this year, just before the U.S.-Iran war broke out.
2. Would an export ban actually lower diesel prices
Against this backdrop, the Trump administration has started to consider the export-restriction card. President Donald Trump said on the 22nd of this month that he had instructed his administration to examine a diesel export ban, and Treasury Secretary Scott Bessent said the same day that officials were "looking at the possibility."
Forecasts diverge on whether a ban would lower diesel prices as the administration hopes, or push them higher. Investment bank JPMorgan projected that a 30-day halt to U.S. diesel exports would send prices tumbling from $6.50 to $4.70 within 15 days. The Global Energy Center at the Atlantic Council, a U.S. think tank, also expected such a move would "almost certainly lower diesel prices in the U.S. in the short term." With the midterm elections imminent, that makes the option hard for the administration to ignore. Some within the Republican Party, which controls the White House, are calling for an immediate export ban.
Opposition is substantial as well. The U.S. oil industry has warned that a ban would instead add fuel to rising international diesel prices. The point is that higher global prices could reach American consumers faster than volumes redirected to the domestic market could spread across the country.
3. Are there no repercussions
As noted, imposing export restrictions during a supply crunch is a step other countries take as well. The problem is that the U.S. is the world's largest diesel exporter. (See the table of major diesel exporters.) The U.S. share has grown even larger amid the Middle East turmoil. According to the U.S. Energy Information Administration (EIA), U.S. diesel exports have topped 1.6 million barrels a day in recent weeks, compared with 1.1 million to 1.2 million barrels before the war.
A ban might work in the short term, but analysts broadly agree that severe repercussions would follow. The first shockwave would most likely hit the European Union and South America. In the EU's case, U.S. supply accounted for a quarter of diesel imports from March to July this year, and that share exceeded 60% in August.
The blow to South America could come back to the U.S. as a boomerang. On this point, the Global Energy Center noted that U.S. agricultural imports could take a hit from a ban. About 40% of U.S. agricultural imports through July this year came from Latin America, including Mexico, and the region is already grappling with severe diesel shortages.
There could be unexpected damage as well. If diesel shortages disrupt overland transport in Mexico, shipments of AI-related hardware into the U.S. — servers, computer equipment and components — could shrink. Mexico accounted for as much as 40% of U.S. computer server imports this year.
That is why analysts expect considerable friction before the Trump administration could actually carry out a diesel export ban. JPMorgan also warns that over the longer term, a ban could lead U.S. refiners to cut diesel output, worsening the global supply crunch.
4. Added pressure on Korean diesel prices
As widely noted, Korean refiners could reap a windfall. Numerous reports have documented how sought-after Korean diesel and jet fuel have become in the EU and Latin America. If U.S. diesel disappears from the market even temporarily, demand for Korean supply would rise further.
Over the longer term, however, it is hard to see this as purely good news. With the government capping domestic diesel at a maximum of 1,773 won (roughly $1.25) per liter through measures such as a price ceiling, rising international prices ultimately increase the burden of sustaining that policy. The Singapore benchmark that sets Korean diesel prices also reached $177.4 a barrel in the fourth week of September, more than 90% above pre-war levels. And as the gap between international and domestic prices widens, it is hard to rule out that Korean refiners would face growing economic incentives to boost exports rather than domestic sales. That is a scenario worth considering on the strength of rising international diesel prices alone, even without a U.S. export ban.
5. How likely is a diesel export ban
Given the megaton-scale impact such a ban could have on energy markets, the calculus inside the Trump administration is complicated. The White House recently denied reports that it was preparing a full 90-day ban on diesel exports, and Energy Secretary Chris Wright said no across-the-board ban was under consideration. Officials are instead weighing alternatives such as a temporary suspension of the federal diesel tax, while some state governments have moved to ease restrictions on road use of tax-exempt diesel.
There is precedent as well. In October 2022, when the fallout from the Russia-Ukraine war was at its harshest and U.S. distillate stocks — diesel, heating oil and the like — fell to their lowest since 1951, the Biden administration also examined a diesel export ban but never carried it out.
That does not mean the export-restriction card is off the table. Above all, as noted, the election is the biggest variable. If diesel prices prove stubborn despite the alternative measures and the electoral landscape turns against Republicans, the administration might well take the gamble. Bloomberg conveyed the mood, reporting that "some refiners are already preparing for legal friction with foreign customers that could arise from halting overseas diesel shipments."
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