Trump wants to ban diesel exports because global supply is tight. This makes perfect sense if you've never thought about what happens when you remove supply from a market that needs supply.
Analysts say banning exports could push global diesel prices higher. Then refiners would adjust their production mix. Then U.S. gasoline prices would climb because refineries can't just make one thing without affecting the other. It's almost like these systems are connected.
The logic goes like this: America has diesel. Other countries need diesel. America should keep diesel. Then America wins. Except refineries sell to whoever pays most. And if you ban them from selling abroad, they make less diesel overall. And then domestic prices spike anyway because refineries aren't charities.
Retail traders are currently Googling "what is diesel" and "can I trade diesel futures" and "why does my Robinhood account not have a diesel section." They will find a way to lose money on this. They always do.
The backfire mechanism is straightforward. Ban exports. Global prices explode. Trading partners retaliate. Refining margins collapse domestically. Gasoline gets expensive because crude oil doesn't magically turn into only the product you want. You get the whole barrel or nothing.
But sure, let's consider it very seriously. Let's gather the top minds. Let's study the issue. Let's pretend we don't have forty years of data showing export bans make things worse for everyone including the country that implemented them.
The phrase "very seriously considering" is doing more work than every economist who'll be ignored when this decision gets made.
Photo by Ivan Karpov on Unsplash
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