Goldman Sachs warns US diesel export ban could disrupt global fuel markets and raise prices in Europe

Goldman Sachs has put a price tag on one of the most disruptive fuel-policy scenarios now being discussed in Washington: a US ban on diesel exports would probably depress American diesel prices, push up European costs and, over time, feed through into higher domestic gasoline prices as refiners respond to weaker margins.

In a report published on 26 September, the bank estimated that US diesel prices could fall by about 25 cents a gallon in the first stage of such a move, or rou...

ghly 4% from a level near $6.50. At the same time, European wholesale diesel could rise by around $3 a barrel, or about 2%, although Goldman said releases from strategic reserves in Europe could cushion roughly half of that increase.

The prospect of export curbs has gained traction as the Trump administration weighs ways to ease pressure on American fuel markets after the war with Iran has constrained Middle Eastern supply. Bloomberg reported this week that US Energy Secretary Chris Wright has been warning industry leaders to prepare for the possibility of restrictions, underscoring how seriously the idea is being discussed inside government.

Goldman does not treat a ban as its central forecast, but it described the idea as a very plausible outcome. The bank’s wider concern is what happens after the first round of price moves. Diesel, gasoline and jet fuel are largely produced together, so a sustained clampdown on exports would not only swell US diesel inventories but also damage refinery economics. Once storage starts to fill, refiners would probably cut throughput, reducing overall fuel output and eventually lifting US gasoline prices as well. Goldman said retail gasoline could rise by about 30 cents a gallon once diesel tanks are full.

That risk matters because the market is already tight. Platts, part of S&P Global Energy, assessed US Gulf Coast export ultra-low-sulphur diesel at a record $4.78 a gallon on 16 September, reflecting the strain in the system. Earlier this year, Goldman said the biggest shock from the Middle East conflict would hit refined products, particularly diesel and jet fuel, harder than crude itself. More recently, hedge funds have cut bearish bets on European diesel to a two-year low, according to Bloomberg, a sign that traders increasingly expect shortages to persist.

The bank’s view on Europe is also shaped by a thin buffer. Goldman argued that European gasoline looks especially vulnerable because its strategic reserves are far smaller than its diesel stockpiles, leaving less scope for the market to absorb a supply shock. On that basis, the bank continues to prefer long European gasoline, seeing it as a market where tighter balances could support prices further.

Goldman also considered the opposite scenario: if any export ban were later lifted, US diesel prices would probably reconnect with international benchmarks, meaning American prices would rise again while European prices eased. Even then, the bank said global refined-product prices would likely remain above the level that would prevail without any ban at all, because refinery output in the United States would have been reduced in the meantime.

For now, the message from Goldman is that a diesel export ban would be a policy shock with effects well beyond one fuel. It would probably bring short-term relief to US diesel users, raise costs in Europe, and leave refiners caught between tighter margins and the risk of having to cut production across the wider product slate.

Source: Noah Wire Services