Mr. President, Please Don’t Make the Diesel Price Problem Worse

Right now, the price of diesel fuel is at record highs, and it’s entirely justifiable that, with a midterm election coming up, President Trump is looking to do something that will calm things down and restore some sense of order to the market. This is an entirely reasonable and wise instinct, and I’m not criticizing the president for having it.

But the solution the Trump administration is floating is a Band-Aid on a gunshot wound, which will actually cause an infection. Banning diesel exports so as to let the air out of the domestic price is going to make things worse, not better — and not just for diesel.

I’ll explain. Most people don’t understand fuel markets at all, much less the diesel market. Typically, what people know about diesel is that some cars and more trucks run on it, and it’s one of the pumps at the gas station, and beyond that it’s a shrug of the shoulders.

But there are things you should know, and they’re things that politicians don’t appear to know — or, in this case, they don’t particularly care, and that’s not good.

On the surface, you’d look at how it works with diesel, and you’d say yes, you can give some price relief to the folks by limiting or banning exports. This is the case because we export diesel. We make more of it than we consume. The fact that we export it means our price, at least on the surface, would come down if we were swimming in it because we don’t sell it elsewhere.

But to effectively close off the diesel market and insulate ourselves from international pressure — more on that in a second — we would need the ability to store diesel at a huge level beyond what we have.

We don’t do much in the way of diesel storage in this country because we’ve never needed to. As such, even with prices close to $6.50 a gallon across the national average and pushing or topping $8 a gallon in California, we don’t have the spare tankage that can eat 1.5 million export barrels a day. Ban the exports and the barrels have nowhere to go. Refiners will not make diesel they cannot store. They will cut runs — and when they cut runs, they’re going to cut gasoline, too. (RELATED: Everyone Wants Affordable Energy. Nobody Wants to Cut the Ribbon.)

You really, really don’t want to see refiners shut in production right now.

Why is this problem so damned bad? People will claim this comes from the Strait of Hormuz, but that isn’t the bulk of the problem. The chief source of this is something Trump has been trying to put a stop to since he took office but can’t, and neither, apparently, can anybody else.

Ukraine has been drone-striking Russian refineries as part of this endless, unsolvable war of attrition between those two countries. It turns out the Ukrainians are pretty good at taking out refineries, too — they’ve knocked some 30 percent of Russian refinery capacity offline. And that is a huge number, because before the start of that stupid war in 2022, Russian refineries were capable of 6.5 million barrels a day, compared with the Europeans’ 14 million or so. Knock out a couple million Russian barrels a day and create a domestic Russian shortage, much less the Russians’ export capacity, and it’s a double-digit hole in the Atlantic Basin’s diesel balance, not a rounding error in world crude. (RELATED: Drill, Baby, Geopolitics: Now It’s a Matter of National Security)

What happens when those Russian refineries go up in smoke? The Europeans start bidding up hydrocarbons, and especially diesel that the Euro economy runs on, all over the world.

What diesel we’re selling internationally is generally going to Europe, which has been true since long before the Ukraine War. Europe is the big customer for diesel. Unlike here, the Europeans run a ton of their cars and basically all of their trucking on diesel. But strangely, they’ve never actually built the refining capacity for diesel that they need. The Europeans actually have a surplus refining capacity for gasoline, and they export that surplus to us. It ends up in gas stations mostly on the East Coast, while diesel from here goes to Europe. So now the Europeans are desperate for every drop of diesel we can sell them, and that’s what’s driving up the price here — and everywhere else.

If Trump wants to do something meaningful, what he needs to do is to launch us into a refinery boom.

And the fact that they sell us gasoline means that if we stop selling them diesel, it’s a decent bet that they stop selling us gas, and if that happens, you could end up with gas lines on the East Coast. The diesel price problem is bad, don’t get me wrong — $8 diesel in California means all those trucks pulling out of the port of Long Beach with consumer products from Asia are getting fueled at an unsustainable price, and something does need to be done about that — but it’s nothing, politically, compared with the whole East Coast running out of motor fuel.

The solution here, or at least the opportunity, is for U.S. refinery capacity to expand to fill the hole the European supply problem has created. And if Trump wants to do something meaningful, what he needs to do is to launch us into a refinery boom. (RELATED: CARBifornia Versus the People)

That’s generally a multiyear structural fix that won’t change anything prior to the midterms. Nothing he can do will save us from high diesel prices in the next five weeks; thank Ukraine for creating at least an intermediate-term, if not a long-term crisis. (RELATED: The Price of Gas and the November Elections)

But there are oil refineries that have been shut down — I know of two along the Mississippi River in Louisiana, there are a number in California, there are a host of them on the East Coast — that Trump could use the Defense Production Act to motivate the reopening of at least some of those facilities and thus expand U.S. refinery capacity within the intermediate term. Challenges would remain — there is no magic wand available here — but if the president leaned hard and broke down some regulatory walls, it is possible to win the race to refinery output that the Ukraine war has touched off. (RELATED: Let’s Wean Ourselves Off Middle East Oil With Alaskan Oil)

Which would benefit U.S. consumers but also those overseas — and reducing some of our aggregate trade deficit in the process.

We could steal market share from the Russians to supply the European market with diesel, just like we’re beginning to do with natural gas. And so long as the Europeans are stupid enough to buy into the Net Zero/climate change idiocy which weakens their own industrial capacity, we won’t lose that business. (RELATED: Green Energy Reels From Major Defeats, but the Battle Continues)

Had we thought ahead, we could have already done this and been poised to take advantage of the Ukraine War. And had we taken steps to turbocharge our ability to refine petroleum into products like diesel, Trump’s deal to essentially put Venezuelan oil production under the U.S. umbrella would put us in a position to serve as the OPEC of the world’s finished fuel products.

That opportunity still exists. It should be taken advantage of posthaste. But this means more exports of diesel, not less.

There is no way out of this mess. The only way out is through. Be much bolder, Mr. President, and don’t waste your time with useless quick-fixes to a long-term problem.

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