The oil industry warns Trump that banning diesel exports will raise fuel prices. Trump hates high fuel prices. Trump is considering banning diesel exports.
This is the same industry that spent decades telling everyone oil prices depend on global supply and demand and geopolitical tensions and OPEC meetings and refinery capacity and seasonal blend requirements. Now they've boiled it down to one sentence. Ban exports, prices go up. Took them long enough.
The experts say a diesel export ban would provide brief relief before prices rise again as refiners cut production. Brief relief. That's what every retail trader experiences between opening their brokerage app and remembering they bought oil stocks at the top because some guy on YouTube said energy was the next big thing.
Here's how this works. You ban exports. Domestic prices drop for maybe three weeks. Refiners realize they can't sell to Europe or Latin America anymore so they cut production because why make diesel nobody can buy at a profit. Supply drops. Prices climb back up. Possibly higher than before. Then Trump tweets that it's someone else's fault.
The policy creates the exact outcome it was designed to prevent. It's like retail traders buying puts to hedge their long positions and then wondering why they lost money in both directions. Except this time it's diesel and the entire transportation sector gets to eat the losses.
Refiners already operate on thin margins. They're not charities. They're not going to produce diesel at a loss just because the president decided exports are bad this week. They'll shut down units. They'll delay maintenance. They'll do whatever cuts costs fastest.
The oil industry finally learned to communicate at a level Trump might understand and he's still weighing restrictions anyway. That's not confidence. That's f*cking tradition.
Photo by Jacob McGowin on Unsplash
Leave a Comment