The Louisiana government, led by Jeff Landry, has declared a state of emergency following a diesel shortage. In this context, farmers and loggers will be permitted to use "colored" diesel with lower taxes in their vehicles for one month. This action is seen as a way to alleviate the pressure from unprecedented diesel prices. This situation reflects the severity of the crisis in the U.S. oil and gas industry.
Emergency Measures in Washington
In Washington, emergency measures to tackle high diesel prices are also on the agenda. Donald Trump, the President of the United States, announced at a press conference that he is calling for a ban on diesel exports. He said, "I have said let’s not export diesel." This view has been supported by some senators, including Chuck Grassley from Iowa. However, there is also widespread opposition, particularly from within the government.
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Challenges of Diesel Export Ban
Chris Wright, the Secretary of Energy, stated at an event in New York, "The blunt tool of a diesel export ban is practically ineffective." These remarks have led to confusion regarding the actions the government may take. Reports indicate that a review of the export ban is being considered at the White House for 90 days, but this news was quickly denied.
Industry groups, including the American Petroleum Institute and the American Fuel and Petrochemical Manufacturers, have warned that this ban could be a costly mistake that would worsen the situation. On the other hand, Senator Grassley hopes that the White House will not heed the warnings of oil companies, arguing that the export ban would benefit farmers.
As of the time of writing this news, no official announcement regarding the export ban has been made. Secretary Wright is in talks with refining industry leaders and has asked them to introduce "voluntary" restrictions. There is also an idea under consideration that refiners may "voluntarily" agree to allocate part of their production for sale at lower prices to farmers and other groups.
Modeling by Wood Mackenzie shows that a diesel export ban could significantly increase fuel costs for most Americans. U.S. diesel and heating oil exports have been around one million barrels per day in the summer. If exports are banned, refiners may lose some flexibility in reducing diesel production, but they will still have significant excess production that needs to be stored.
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