Time for a diesel export ban?

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Kai Ryssdal (1:02)

Coming up today on the program, be very careful what you wish for. From American public media, this is Marketplace.

In Los Angeles, I'm Kai Ryssdal. Tuesday, today, the 22nd of September. Good as it always is to have you along, everybody. We're going to begin today with a story from the file I keep on my computer labeled, Are you really sure you want to do that? Depending on which official in the Trump administration you listen to, we are either looking at a temporary ban on exports of diesel fuel, that was Treasury Secretary Scott Besson today, or calling for a ban that was the president of the United Nations today. Various and sundry senators and governors have said essentially the same thing, trying to get the government to do something to bring diesel down off its record highs, $6.52 a gallon today on average, says AAA.

This though is where I should probably tell you that the subheading on that computer file is good examples of the law of unintended consequences. Here's Marketplace's Samantha Fields.

Samantha Fields (2:12)

When Sarah Dane last bought diesel for her farm equipment back in July, she paid $3.60 a gallon, which was still a little over a dollar more than I paid a year before that. Dane owns Fresh Hopped Farm, about 700 acres in eastern Montana.

Sarah Dane (2:26)

We grow corn, soybeans, and wheat with some alfalfa.

Samantha Fields (2:30)

She's already harvested the wheat for the season, which took about a thousand gallons of diesel. Now it's time to fill up her tanks again.

Sarah Dane (2:37)

I got my prices this morning, and regular diesel is $6.14, and the died diesel that goes in the tractors is $5.60. So, if I fill both of my tanks, which are both currently empty, it will cost me $11,740 as of this morning.

Samantha Fields (2:54)

That strain on farmers is why some officials are calling for a ban on diesel exports.

SPEAKER_6 (2:59)

Sounds like a fairly easy thing to do that would maybe increase the supply of domestic diesel.

Samantha Fields (3:06)

But Hugh Daigle at the University of Texas at Austin says while it might reduce prices temporarily, In the long term, it's probably not such a great idea. Diesel is a global market, and Bob McNally at RapidAnn Energy Group says if you were to pull US exports out of that market, You would see global prices for diesel skyrocket. That would immediately push prices up on the East and West coasts where most diesel is imported. Even though the US produces plenty, there's no good way to transport it across the country.

Bob McNally (3:36)

Now, for a brief period of time, the pump price in Texas and Louisiana and some of the Midwestern states would collapse.

Samantha Fields (3:44)

But McNally says oil refiners would then see their profits collapse, too.

Bob McNally (3:49)

And in response to that, refiners will reduce their production.

Samantha Fields (3:54)

Which would then push prices back up. I'm Samantha Fields for Marketplace.

Kai Ryssdal (3:59)

Consequences of the unintended kind. In lower Manhattan today, the corner of Wall Street and Broad, not a whole lot of equity enthusiasm. Bonds held pretty much steady. Oil down again. We will have the details when we do the numbers.

The big economic event of the week is Chinese President Xi Jinping's state visit. Artificial Intelligence is of course going to get all the headlines. The war in the Middle East and its associated issues will get some agenda time, too. But as always, it would be a very big mistake to sleep on the trade relationship between the two biggest economies on the planet. So we have called Chad Bowne, he's a senior fellow at the Peterson Institute of International Economics, to get some insights. Chad, it's good to have you on.