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The Energy Report

Phil Flynn
http://www.pricegroup.com/
pflynn@pricegroup.com


An Export Ban Is Not the Answer. The Energy Report 09/23/2026

There are growing calls for a diesel export ban, but that is not the answer.

Diesel prices are rocketing higher as the U.S. exports record amounts overseas to help keep the lights on in Europe. The temptation is to say, “Hey, wait—what if we kept it here at home? Then our prices would be low, and this winter Europe can freeze.” As tempting as that might sound, in a global market the ramifications of an export ban could set off an unwanted chain of events: a deeper global squeeze, retaliation from trading partners, lost U.S. refining jobs, and more economic pain here at home.

Instead of truckers paying sky-high diesel to move goods, an export ban could lead to a situation where there are fewer goods to move. Gulf Coast refiners produce more diesel than that region can use. Exports are the outlet that lets those plants keep running hard. Cut that outlet and storage fills up. Then they cut runs. When they cut runs, they don’t just make less diesel—they make less gasoline and jet fuel too. That’s how you turn a diesel problem into a broader fuel problem.

President Trump says he will look at it. I think after a review the administration will agree that a diesel export ban will cause more problems than it will solve. The best answer is still to let the market work. High prices start to correct high prices, and we are getting closer to an adjustment. The real key is a ceasefire between Russia and Ukraine—and an end to the broader refining disruptions overseas. That will go a long way toward fixing a market that has been broken mainly by climate-change obsession and Europe’s short-sighted energy policies.

On the flip side, a diesel export ban is short-sighted. A lot of people think it might solve the short-term problem. It will lead to larger problems down the road.

The head of the API put it plainly. Mike Sommers, president and CEO of the American Petroleum Institute, said: “Americans are hurting from rising diesel costs driven by an unprecedented disruption to global refining capacity. We understand the administration is looking at every option to deliver relief, but restricting U.S. energy exports would only compound the problem—exacerbating refining challenges and ultimately hurting consumers. The answer is more supply and more flexibility—not new restrictions that risk making a difficult situation worse.”

API’s follow-up piece was even blunter: a ban would remove the single largest source of seaborne diesel from a market that already lost millions of barrels a day of refining output. The U.S. supplies about 1.5 million of the 8 million barrels of diesel traded globally by sea—roughly 20%. Take that out and the consequences get ugly fast, including the risk of lower U.S. refinery runs and even higher prices here.

He’s not alone. Energy Secretary Chris Wright has said putting barriers on flows quickly reduces production—“You’ll have less supply. We need more supply, not less supply.” Interior Secretary Doug Burgum said they would consider a ban if they thought it would actually lower prices, “but that’s not the case.” The refiners’ group AFPM called it a policy that would backfire. Analysts have warned global prices could spike sharply, East and West Coast import-parity prices could rise, Latin American buyers (Mexico, Brazil, Chile) could struggle, and that can feed back into U.S. food and supply-chain costs. One Atlantic Council note even flagged knock-on risk to U.S. grocery prices if Latin American farmers and truckers lose U.S. diesel.

So yes, diesel is painful. Farmers and truckers feel it every day. But an export ban is not a free lunch. It is a short-term political sugar high that can cut U.S. production, squeeze allies, invite retaliation, and leave us with less gasoline as well as less diesel. Let the market work, keep the plants running, and fix the wars and the policies that broke the refining system in the first place. That’s the path that actually brings prices down without blowing up the rest of the energy complex and the economy here at home.

And it appears the crack spreads and the momentum have shifted—gasoline is pulling away from diesel. That gasoline crack spread is making the case that refiners still need to produce gasoline as well, not just chase diesel.

But the bigger issue, of course, is President Trump’s peace efforts. Reports overnight that the U.S. and Iran spoke for hours—Trump called it a very good, very productive meeting, with more talks coming—are raising hope of some type of settlement. At the same time, reports that oil flows on the Saudi East-West pipeline are coming back online are sending a signal that the crude market is going to be better supplied. Any real peace deal with Iran would only exacerbate that well-supplied crude picture.

Diesel is a different animal. For diesel it still comes down to refining capacity. We still need to see a ceasefire between Russia and Ukraine, because right now that is the hot spot for distillate. Sure, Katie, briefly getting more barrels flowing through the Strait of Hormuz would also ease the diesel squeeze. But let’s face it: the core problem is still refining capacity for diesel. That’s the bottleneck.

ast night’s API report pretty much lined up with that split. For the week ending September 18, crude stocks rose 1.786 million barrels—another build after last week’s jumbo 7.14 million-barrel increase, and well above the draw the Street was looking for. Cushing added about 2.08 million barrels, so the WTI hub is not screaming shortage. The SPR chipped in another 400,000-barrel draw and now sits around 284.6 million barrels.

The products side is the other story. Gasoline inventories fell 2.16 million barrels and distillates dropped 2.164 million. That is why diesel still feels tight even as crude looks better supplied. Distillate was already about 13% below the five-year average going into this report, so another two-million-barrel draw keeps the squeeze on. Gasoline is pulling some of the refining margin, which is why refiners cannot just max diesel and ignore the gasoline barrel. So the API tape is simple: more crude in the tanks, less gasoline and diesel. Crude is sending a well-supplied signal. Diesel is still a refining-capacity and inventory problem. EIA later this morning will tell us if official numbers confirm that split.

. Natural gas is back above $3 again. Pretty exciting—but can it last? Front-month futures punched through $3 this morning after settling $2.965 yesterday. That’s the highest print since early July. The tape is reacting to leftover September heat, that Fox Weather warned us about and a tightening storage picture, and the idea that LNG demand is still the floor under this market.

Fox Weather has been talking about that late-summer hangover. Cooling demand eased a bit last week, but degree days were still well above normal, especially in the Southeast. Power burn stayed heavy. NGI is looking for only about a 56 Bcf injection in the next EIA storage report—Thursday, covering last week—versus 77 Bcf a year ago and a five-year average closer to 76 Bcf. The last official print was a bullish 44 Bcf build, leaving working gas at 3,298 Bcf, 122 Bcf below last year. The surplus to the five-year average has been shrinking. If we keep injecting light into October, $3 is not a fluke. If the heat breaks clean and we get fat 70-plus Bcf builds, this rally fades.

Exports are the tug-of-war. More trains are coming on—Golden Pass commissioning, Corpus Christi Stage 3 still ramping, Plaquemines adding output. That is the bull case: more feedgas leaving the Gulf for Europe and Asia as they refill before winter. LNG deliveries were still running in the high-18 Bcf/d neighborhood recently.

The other side is planned maintenance. Cameron LNG has had a train offline for scheduled work, and Cove Point was slated to shut around September 19 for its annual turnaround. When a Gulf train goes down, feedgas drops a few hundred million cubic feet a day. That takes demand off the table just as storage is trying to catch up. So you get this messy mix: new trains coming on, old trains going down for work. Net exports can stall even when the long-term story is more capacity.

Hurricane risk is the wild card Fox Weather keeps circling. This has been a below-normal Atlantic season thanks to El Niño shear. Colorado State is still favoring quiet activity through the end of September. But Bryan Norcross’s point stands: Florida’s landfall season runs late, and if anything pops now it is more likely a homegrown system in the eastern Gulf, near the Bahamas, or east of Florida—not a classic Cape Verde monster. The National Hurricane Center has been watching Tropical Depression Fay and a few tropical waves. One storm through the Gulf LNG corridor or a near-miss that shuts platforms is all it takes to squeeze gas and refined products at the same time. Season isn’t over until November 30. Don’t get sloppy.

So can $3 last? Short term, yes, if EIA prints another light injection and the warmth hangs on. It does not last if maintenance cuts exports, production stays fat, and the tropics stay quiet. The real bid into winter is still LNG plus weather. Crude is flashing “better supplied.” Diesel is still a refining-capacity problem. Gas is a weather-and-export market that just woke up above $3.

That is why you have to download the Fox Weather ap and you need to stay tuned to the Fox Business Network. Invested in you! Make sure you call today to open your accent by calling me at 888-264-5665 or email me at pflynn@pricegroup.com



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