Invest1 publisher3 min readPublished
Burchett's bill would halt US diesel exports whenever the average tops $5 a gallon
The US national average is a record $6.51 a gallon, and Rapidan Energy puts the odds of a White House export ban at 35%. The flow that would stop is 1.5 million barrels a day, a fifth of world seaborne diesel.
The Investor · Invest desk
What happened
- Trump phoned Zelenskyy the day before the Financial Times report and urged him to stop Ukrainian strikes on Russian refining facilities, saying the attacks were worsening a global diesel shortage.
- Republicans from Iowa and Tennessee want exports stopped, and Tim Burchett filed one bill suspending diesel exports through January and another halting them whenever the national average exceeds $5.
- Consulting firm Rapidan Energy put the probability of the White House imposing a diesel export ban at 35%.
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Why it matters
- exposure European and South American buyers take the first hit from a decision set by a US election calendar: replacing the American fifth of a roughly 7.5 million barrel a day seaborne market means outbidding somebody else for cargoes.
- contradiction The sponsors sell the ban as relief for farmers and truckers, while the oil industry told the FT that domestic prices would rise further before Gulf Coast barrels reached the rest of the country.
- decision Sellers committing Gulf Coast cargoes past January are now attaching a 35% probability that Congress or the White House closes the route under them.
- precedent Grassley's argument puts refined fuel in the same category as export-controlled semiconductors, so the next commodity that spikes into an election gets the same treatment proposed.
Burchett's trigger bill is the one with a number in it: exports halt whenever the national average tops $5 a gallon [9], and at $6.51 the average has to fall 23% to get back under that threshold [4][3]. A rule written as a circuit breaker would arrive as a standing embargo, and it would stay shut through the tightest stretch of the market.
The objection on the record comes from the refiners. The Financial Times reported that the American oil industry expects supply to take considerable time to reach the whole country even with exports halted, because refining capacity is concentrated on the Gulf Coast. Diesel prices would rise further in the meantime, the paper reported [13]. The lawmakers pressing hardest are from Iowa and Tennessee [7], where frustration is mounting among truckers and among farmers heading into harvest [23].
The United States ships about 1.5 million barrels a day [10] and that is a fifth of the world's seaborne diesel trade [11], which puts the waterborne market near 7.5 million barrels a day [1]. Europe and South America are the main importers [12]. A halt does not reduce what they need; it sends them to bid for cargoes somewhere else.
Prices are up more than 70% since February, when war broke out between the United States and Iran [5]. Back out the 70% and the pre-war national average was near $3.83 a gallon [2]. Prices are unlikely to ease while that war is unresolved [2]. The Ukrainian drone campaign adds to that. A Moscow refinery burned after a drone attack that killed at least two people, hours before the phone call [17]. Moscow said its air defenses shot down 450 drones in Ukraine's largest assault to date [18]. A senior Ukrainian official told the FT, "President Trump's core message was 'diesel, diesel, diesel.'" [6]
Pressing Kyiv costs Washington nothing. An export ban stops 1.5 million barrels a day of sales [10]. Rapidan Energy puts the chance of the ban at 35% [14], leaving 65% on no ban [4]. Senate Majority Leader John Thune said he would look at anything that could be a real solution for bringing down diesel prices, and that an export ban could be one way to address it [15]. Bob McNally, who founded Rapidan, said the more cornered the Trump administration and the Republican Party become, the more desperate they will be [16].
I would take the under on 35%. The case against comes from the companies that would have to make the ban work, and the supply it frees up arrives after the votes are counted. The counter-argument is the election timetable: with about 40 days left [1] and the majority leader declining to rule a ban out [15], the political cost of doing nothing rises every week. If a Middle East settlement pulls the national average back under $5 before November, Burchett's trigger loses its predicate [9]. If the average climbs instead and an order lands in October, everyone shipping 1.5 million barrels a day [10] will have been holding a 65% bet [4] that exporting stayed legal.
What to watch
- Whether Ukrainian strikes on Russian refineries pause after Zelenskyy's scheduled summit with Trump at the UN General Assembly on the 22nd.
- Whether Thune schedules a floor vote on the export suspension bill, or the White House moves by order before the midterms.
- The national average against the $5 threshold: a fall below it before November removes the trigger bill's premise.