Why a diesel export ban could send California gas prices soaring

Por Alex Nieves — POLITICO – TOP Stories

President Donald Trump is considering banning diesel exports as fuel prices skyrocket — a move that oil companies and market researchers warn could push California’s already nation-high gasoline prices even higher.

The White House’s discussions around plans to limit diesel exports — first reported by POLITICO — emerged last week as Republicans seek ways to appease anxious voters ahead of the midterms.

The national average for a gallon of diesel has eclipsed $6 for the first time ever amid major supply disruptions linked to the war in Iran and a Russian export ban that’s taken one of the world’s largest suppliers off the market. (The price stood at $6.45 nationally and $8.39 in California as of Monday, according to AAA.)

Forcing U.S. refiners to keep diesel at home could temporarily lower the price of the fuel that tractors, trucks and ships use to produce and transport goods around the country, according to market analysts.

“The short answer is, we would have more diesel if such a ban really were instituted,” said Aaron Smith, an economist and professor at the University of California, Berkeley. “That would lower prices.”

But a dip in diesel prices could be offset by pricier gasoline and jet fuel.

Refining a barrel of crude oil produces roughly 45% gasoline and 30% diesel (the rest becomes jet fuel, asphalt, and other products). In a state like California — which exports most of the diesel it produces — oil companies could be forced to store diesel in tanks and eventually cut back on refining. The resulting hit to gasoline supply would mean higher pump prices in a state where the average price of regular gas is $6.36 per gallon.

“We don’t have a whole lot of extra storage space in California to store that surplus,” said Jodie Muller, CEO of the Western States Petroleum Association. “So when the tanks get full and there’s nowhere for it to go, the refineries will have to cut back, and that leads to widespread concerns not only for diesel but also for gasoline and jet fuel.”

While the White House hasn’t committed to a diesel export ban — despite Trump endorsing the idea last week — the possibility has drawn uncharacteristically fierce opposition from an oil industry that has benefited from the president’s return to office.

The Trump administration has revoked California’s authority to enforce electric vehicle sales requirements and rolled back federal fuel efficiency standards, while bulldozing state efforts to restrict offshore oil drilling. But the threat of an unprecedented diesel export ban has left oil companies publicly pushing back at the White House.

“Americans have been feeling the impacts of higher prices for such a long time now, and we don’t need to add to that with some sort of quick-fix solution that really isn’t one and would backfire and is not as simple as it sounds,” Muller said.

Severin Borenstein, faculty director of the Energy Institute at UC Berkeley’s Haas School of Business, said the episode could force oil industry leaders to reevaluate their relationship with the White House.

“I suspect they have been thinking that this administration is well aligned with the oil industry, and it has been in many areas, but Trump’s alignments are purely transitory,” Borenstein said. “So this isn’t surprising at a time when the politics are suddenly running very much against the oil industry.”

California Republicans, for their part, appear to be keeping their distance. None of the eight House Republicans who represent California districts responded to requests for comment. Nor did GOP leaders in the state legislature.

The White House, which has offered mixed messages about whether an export ban is still on the table, said Monday that “no policy decision has been made at this time.”

“The President wants to see gas prices at the pump fall and is evaluating all the options on the table,” a White House official said in an email. “Ultimately, President Trump will make the decision that is best for the American people.”

Meanwhile, Gov. Gavin Newsom announced Monday that he’d suspended a requirement that refineries supply a cleaner, but more expensive gasoline blend typically used in summer months when air pollution is worse, taking a swipe at Trump in the process.

“For over seven months, the Trump administration and Republicans in Congress have failed to protect working families from their nationwide gas and diesel price crisis – and there is still no end in sight to the war,” Newsom said in a statement. “California will keep doing what we can to bring costs down and protect consumers – but states cannot indefinitely insulate families from a global oil shock. Trump must end his war.”

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Fonte: POLITICO – TOP Stories