White House drafts a 90-day diesel export ban; refiner stocks fall, then recover most of the drop by the close

The Trump administration is preparing a plan to halt diesel exports for 90 days, Politico reported on Wednesday, according to CNBC and Reuters. On the same day, Energy Secretary Chris Wright told The Wall Street Journal the administration was weighing restrictions rather than an outright ban. "We're trying to avoid a blunt hammer of a government policy," he said, as quoted by CNBC. No decision has been announced. A White House official told CNBC the president "is evaluating all the options on the table."

Diesel averaged $6.52 a gallon nationally on Wednesday, according to AAA figures cited by CNBC and Fortune. That is nearly $3 more than a year ago.

What 90 days actually means

The time frame is the new detail in Politico's report, and the Energy Information Administration's weekly data shows how much fuel it covers. U.S. distillate exports averaged 1.56 million barrels a day over the four weeks to Sept. 18. Keep that much at home for 90 days and it adds up to about 140 million barrels. At last week's lower pace of 1.33 million a day, it would be about 120 million.

Either figure is larger than the entire U.S. distillate inventory, which stood at 107.4 million barrels on Sept. 18. That is down 12.7% from a year earlier. The calculations are ours, based on EIA's numbers. Supporters of a ban see that as a supply of fuel that could quickly bring down prices at home. Wright and the refiners see a volume the domestic market cannot absorb. On their reading, storage would fill and refiners would cut runs. That would reduce gasoline and jet fuel output along with diesel.

Who would get relief, and who would not

Bob McNally of Rapidan Energy told CNBC that a ban would bring a short price drop mostly on the Gulf Coast, where refining is concentrated, and in the lower Midwest. He said the Northeast would see little relief because it relies more on imports. After that, he expects prices to end up higher than they otherwise would have been. He also warned that Europe could retaliate by restricting gasoline shipments to the U.S. The Northeast depends on those shipments.

For a farm in Iowa or a hauler running out of Houston, that means the relief would be real but might not last. A fuel dealer or fleet in New England would get the risks of a ban without much of the benefit, just as the heating oil season begins. An unnamed oil industry executive told CNBC that a ban could raise fuel prices by 30 cents a gallon. The American Petroleum Institute says the U.S. supplies about 20% of the world's diesel exports, Fortune reported.

What refiner stocks did

Refiner shares dropped after the Politico report, then recovered most of the losses before the close, according to Nasdaq data:

At its low, Valero was down 3.2% from Tuesday's close. It finished the day down 0.3%. That pattern suggests traders are treating an outright ban as possible but not the most likely result. Consultant Dan Pickering, quoted by Fortune, put the probability at "still less than 50%." The two smaller refiners, PBF and Delek, held on to more of their losses.

Background: Wright's case against a ban, Trump backs a ban, and what record diesel means for truckers and farms. Chart: crude oil.

Sources: CNBC; Fortune; Politico, as reported by CNBC and Reuters; EIA Weekly Petroleum Status Report, tables 4 and 9; Nasdaq quotes. The 90-day volumes are our calculations and assume export rates stay at recent levels. This is market information, not investment advice.