Diesel Export Restrictions Could Backfire on US
WASHINGTON: A US proposal to restrict diesel exports in an effort to lower domestic fuel prices could have the opposite effect by reducing supplies in the global market and driving prices higher.
The concern comes as US diesel prices hit record highs, with the average price reaching US$6.50 (RM26.48) per gallon on Friday, up from US$5.61 (RM22.85) a month earlier, according to the American Automobile Association (AAA).
At the same time, global diesel supplies are tightening following disruptions at refineries in Russia and the Middle East, reducing the amount of fuel available on the global market.
The US is the world’s largest diesel exporter, and as the fuel is traded globally, any reduction in US exports could affect supplies in other countries.
The administration of President Donald Trump and Republicans are considering restrictions on diesel exports to increase domestic supplies and ease price pressures on US consumers.
However, energy analysts warned that such a move could prompt US refiners to cut production as more diesel accumulates in domestic storage tanks.
“If implemented, it would cause product prices in Europe and Asia to rise as buyers of US fuel, mostly in Latin America, scramble for alternative supplies, pushing prices higher,” Rachel Ziemba, a senior fellow at the Center for a New American Security, told Al Jazeera.
Meanwhile, analysts at Wood Mackenzie said keeping more diesel in the US would eventually fill available storage capacity, forcing refineries to reduce production.
The situation could affect countries that rely heavily on US fuel, including those in Latin America and Europe, which may be forced to compete with other buyers for supplies from global producers.
Wood Mackenzie said China is the only major producer with sufficient spare refining capacity to potentially offset a significant portion of the shortfall caused by reduced US production, although it may not view such intervention as being in its own interest.
Wood Mackenzie also warned that an export ban could quickly fill US diesel inventories, forcing refiners to cut crude oil processing and potentially increasing US petrol imports.
An analysis by S&P Global found that a comprehensive ban could reduce production by as much as 750,000 barrels per day once storage capacity is filled with unsold diesel.
UTUSAN