The US government is reportedly preparing a 90-day diesel export ban, though the legal process remains unclear, with President Donald Trump inclined to introduce it before the end of the week. Wall Street giant Morgan Stanley warns that the Trump administration's restriction on diesel exports would carry "significant implications," and American drivers should brace for higher gasoline prices.

In a September 23 report, Morgan Stanley analyst Martijn Rats and his team said banning diesel exports would fill domestic storage tanks within weeks, forcing US refiners to scale back production activities, thereby reducing gasoline output and driving prices up. The report noted that "the ban could have a counterintuitive effect, namely that if US refiners lower their utilization rates, gasoline prices would rise."

The analysts stated that the bank does not currently treat the Trump administration's diesel export ban as a base-case scenario, but if implemented, US refiners would have to slash daily refining volumes by approximately 2 million barrels. They added that even if refiners adjust output at lower utilization rates to maximize gasoline production, US gasoline supply would still shrink by about 650,000 barrels per day.

Meanwhile, US diesel prices would fall, while overseas diesel costs would climb, with Europe "hit the hardest." The analysts further noted that as long as the discussion over whether the US will implement the ban remains ongoing, the market should prepare for additional volatility.

Why Trump May Push an Export Ban to Ease Diesel Prices Ahead of Midterm Elections

Earlier this week, Trump stated that he was encouraging his aides to support a ban on US diesel exports. He made the remarks during a meeting with Ukrainian President Volodymyr Zelensky on the sidelines of the United Nations General Assembly, having previously urged Zelensky to halt attacks on Russian refineries—strikes that have already prompted Russia to restrict its own diesel exports.

Russia's diesel export ban is set to last at least until September 30, as the government attempts to secure domestic supply amid Ukrainian attacks. Before an unprecedented wave of Ukrainian strikes, Russia was a major diesel exporter, supplying about 10% of global volumes.

At the same time, ongoing Middle East conflicts have tightened supply and pushed diesel prices sharply higher this year. In the region, sustained US-Iran tensions have constrained energy exports through the Strait of Hormuz—a waterway that carries one-fifth of global oil and liquefied natural gas traffic in peacetime, along with substantial refined product volumes. Recent escalations between Saudi Arabia and Yemen's Houthi rebels have also disrupted Red Sea shipping, and refinery attacks in the Middle East could further restrict refined product availability in the Gulf region.

Diesel fuels trucks, trains, ships, and heavy equipment, and also powers farm machinery, electricity generation, and home heating. Rising autumn heating and agricultural demand could amplify the impact. Because consumers are more sensitive to retail gasoline prices, diesel increases often go unnoticed, but their effects ripple through food, transportation, construction, and commodity prices.

Why Diesel Is a Hidden Driver of Inflation

Bob McNally, president of Rapidan Energy, said diesel is "the more hidden, more expensive, and more consequential fuel," serving as the true lifeblood of the economy. GasBuddy analyst Patrick De Haan warned that "every truck, every delivery, every package, and every purchase becomes more expensive."

De Haan noted that Americans now spend roughly $700 million more per day on gasoline and diesel than a year ago, and that record diesel prices will affect every cargo, every transport run, and could reignite inflation across the entire supply chain. He added that diesel at current levels would act as a "silent killer" for the economy.

The proposed diesel export ban is aimed at lowering US diesel prices before the midterm elections to ease voter concerns over rising living costs. With elections approaching, record diesel prices could erode support for Trump's Republican Party in agricultural states like Iowa, and also affect states such as Maine that rely on heating oil.

AAA data shows the national average diesel price climbed to $6.53 per gallon on Monday, an all-time high, compared with $3.76 per gallon in late February. Despite being one of the world's largest refining nations with an extensive refinery network processing millions of barrels of crude daily, refined product prices remain steep.

US refiners are already running at nearly full capacity. Since July, refinery utilization has hovered at or above 95% for nearly two months, raising the risk of equipment failures and maintenance delays, and potentially aggravating already tight supply conditions.

Officials Divided Over the Ban

Treasury Secretary Scott Bessent has said the US is "reviewing whether it is feasible within overall refining capacity and whether a full or partial ban could work." However, Energy Secretary Chris Wright and Interior Secretary Doug Burgum both oppose the export ban. Wright has stressed that the US should seek to increase supply rather than cut foreign sales.

Wright said last week that the ban would create a diesel surplus along the US Gulf Coast and force refiners to lower utilization rates, leading to reduced gasoline output. Still, according to insiders, Wright has told industry leaders to prepare for possible diesel export restrictions. In public, Wright has emphasized that refiners may voluntarily limit exports without an actual government ban.

Why the Ban Could Backfire on Gasoline Supply

Like Morgan Stanley's analysts, many experts believe a diesel export ban could prove counterproductive, as US refiners may process less crude after losing overseas customers, meaning they would also produce less gasoline and jet fuel, pushing those prices higher. Another complicating factor is that some US regions, such as the Northeast, import diesel. If the US imposes the ban, global diesel prices would rise, forcing these areas to pay even more.

US refineries are concentrated along the Gulf Coast, while pipelines to East Coast population centers are running at or near full capacity. A lack of sufficient tankers to move fuel to the West Coast means prices there could still rise despite export restrictions.

Refining Industry Rejects the Proposal

Geoff Moody, senior vice president of government relations and policy at the American Fuel & Petrochemical Manufacturers, an industry group representing refiners, said a diesel export ban would be counterproductive. "That means less US fuel production, tighter supply, reduced energy security, and higher prices for Americans," he said. He added that "there is no benefit to the ban, which is why administrations of both parties have repeatedly chosen to oppose fuel export restrictions."

The US once enforced a 40-year crude oil export ban following the 1975 Arab oil embargo, when the refining sector was heavily reliant on foreign crude. Congress lifted that ban in 2015. Given that lifting export bans under emergency conditions is politically harder than imposing them, the oil industry does not want to see another ban introduced.

Additionally, the legal basis for implementing the ban remains unclear. Analysts note that the International Emergency Economic Powers Act allows the US president to restrict exports during a national emergency involving an "unusual and extraordinary threat," but any restriction could face immediate legal challenges. Consulting firm Rapidan Energy, however, argues that the president's power to ban exports is "beyond doubt."