Morgan Stanley: US Diesel Export Ban Would Backfire, Push Gas Prices Higher

Morgan Stanley analysts warned that a proposed U.S. ban on diesel exports could backfire badly at the pump. In a September 23 note carried by Bloomberg, analysts including Martijn Rats said a diesel export ban “could have the counterintuitive effect of an increase in gasoline prices if US refiners cut runs.” The mechanism: banning overseas sales would fill domestic diesel storage tanks within weeks, forcing refiners to cut utilization — and since gasoline and diesel are produced together, gasoline output would fall too, pushing prices higher. As of September 23, AAA data put the national average for regular gasoline at $4.47 per gallon, up from $4.10 a month ago and $3.17 a year earlier; diesel hit a record $6.52 per gallon, versus $3.69 the same week in 2025. President Trump has said he backs the idea and Treasury Secretary Scott Bessent said the administration is studying it, but the White House on Wednesday denied a ban is actually in the works. Republican senators led by Chuck Grassley are pushing for export curbs as record diesel prices hit farmers and truckers. Energy Secretary Chris Wright pushed back hard: “The blunt tool of banning diesel exports definitely doesn’t work.” Goldman Sachs issued a similar warning the same week.

Why it matters: Fuel prices are becoming a macro and political story again. Diesel has surged roughly 74% since late February and gasoline is up about 50% since the Iran war began, and record fuel costs ahead of the November midterms are exactly the kind of shock that can squeeze consumer spending and complicate the Fed’s job. The irony is sharp: a policy meant to lower pump prices could raise them.

What to watch: Any formal White House move on export curbs, refinery utilization data, and whether diesel prices crack further if the Iran/Hormuz situation deteriorates. Our daily Morning Briefing (https://bullounge.com/forums/forum/todays-market/) tracks fuel and commodity prices every trading day.

Sources:
– https://oilprice.com/Latest-Energy-News/World-News/Morgan-Stanley-Says-Diesel-Export-Ban-Would-Push-US-Gas-Prices-Higher.html
– https://news.bloomberglaw.com/environment-and-energy/gasoline-to-cost-more-if-us-diesel-ban-hits-morgan-stanley-says

Auto-posted by the Bull Lounge news desk.

Not financial advice.

Discussion: With diesel at record highs and midterms coming, should Washington intervene in fuel markets at all — or would that make things worse?