Diesel prices in the USA are rising sharply, and exports are also growing at the same time. Calls for an export ban are therefore becoming louder. This would particularly affect Europe.
Dusseldorf. There is currently discussion in the USA about a diesel export ban, which Republican politicians in particular are calling for. The news portal Politico reported on Wednesday that the US government was preparing a 90-day ban. The White House denied the report, but the news still moved energy markets.
US diesel for delivery in a month fell by up to six percent on Wednesday, while European futures rose by up to seven percent. Prices stabilized on Thursday.
Experts warn about the impact of a diesel export ban that the US government is apparently considering. Europe would particularly suffer from this, but it could also have negative consequences for the USA.
Josh Michalowski, an expert on the European diesel market at price reporting agency Argus Media, said: “A US export ban would have devastating consequences for diesel supplies in Europe.” Arne Lohmann Rasmussen, chief analyst at Global Risk Management, speaks of a “nightmare scenario”.
The background to the discussion about an export ban is diesel prices in the USA. These have risen to a record high due to the Iran war. The shortage on the world market is exacerbated by an export ban in Russia. Fuel is in short supply there due to drone attacks by Ukraine on oil refineries.
The USA has significantly increased its diesel exports
“If you take the delivery failures from the Gulf region and Russia together, according to the IEA (note: the International Energy Agency), the market was missing almost 1.6 million barrels of diesel per day compared to February, when around 45 percent of the global seaborne export supply still came from these two regions,” explains analyst Carsten Fritsch from Commerzbank.
According to the IEA and data from analysis firm Kpler, global diesel exports in August were 4.6 million barrels per day, only half a million barrels per day below the level of a year ago. “The USA has played an important role in easing supply in recent months, significantly increasing its exports of middle distillates since the beginning of the Iran War,” says Fritsch.
In August, the USA already covered around half of Europe's diesel imports.
The Commerzbank expert doubts whether the USA can maintain this export dynamic. Because US inventories have already fallen significantly. In the USA, however, voices are becoming louder calling for an export ban in order to reduce the price of diesel in our own country and thus relieve the burden on companies and consumers.
Such a ban would have significant consequences for Europe, warns Argus expert Michalowski: "In August, the USA already covered around half of Europe's diesel imports. Even a partial ban would eliminate a large part of the European supply."
Prices could rise even further
It would be difficult for Europe to fill this gap. “There is already intense competition with the Asia-Pacific region and Africa for supplies from India and the Middle East,” says Michalowski.
Nevertheless, he continues, it is unlikely that the gas stations will run empty since Europe produces around 70 percent of the diesel it consumes itself: “The prices would just be very high.” An export ban could therefore push international diesel prices above the all-time highs already recorded this year.
However, diesel prices are already a significant burden for companies at their current level. Dirk Engelhardt, board spokesman for the Federal Association of Road Haulage, Logistics and Waste Disposal (BGL), sent an open letter to Chancellor Friedrich Merz (CDU) last Wednesday in which he described the burdens. The rising prices are also having an impact on agriculture and the construction industry.
As a result, the rising diesel prices are also a concern for the European Central Bank (ECB). Because these drive inflation, explains economist Torsten Slok from the asset manager Apollo Global Management: “Diesel is an intermediate good that flows into the delivery costs of almost all physical goods.”
This means that the increase in diesel prices will spread to the prices of core goods and services with a time lag. In response, the ECB could further increase its key interest rate. Rising capital market interest rates could then increase the burden on companies and consumers even further.
The USA could also be among the losers
However, European diesel traders believe a partial ban is more likely than a complete one, reports Michalowski: “The latter would quickly replenish US inventories, leaving no room to store the excess diesel.”
A complete export ban would therefore also have negative consequences for the USA, warn analysts at the major bank Morgan Stanley: “A direct export ban would have significant effects, including probably higher gasoline prices.”
Because if local storage tanks are full, U.S. refineries would cut production, leading to lower gasoline production and higher prices. A complete export ban is therefore not Morgan Stanley's base case.
The unclear outlook is causing uncertainty on the financial market. As long as there is discussion about a US export ban, the market must prepare for further volatility, write US Bank analysts. The eyes of traders and investors in the energy market are therefore focused on the White House in Washington.
