Goldman Sachs analysis finds a US diesel export ban would initially lower diesel prices but eventually raise gasoline prices and disrupt global markets.
Goldman Sachs has been running models on how US limits on diesel exports might play out, and the bank expects the measure to drive a wide split between fuel prices at home and abroad.
According to Goldman, a ban on exports would first put downward pressure on US diesel prices while stockpiles grow. As long as there is storage room, each week of curbs could knock roughly 25 cents off a gallon of US retail diesel, or just under 4% of the current level around $6.50.
Matters would get more complex once the curbs go on long enough to fill available tanks. Because diesel, gasoline and jet fuel mostly come from the same refining process, a weaker diesel market could eventually prompt US processors to cut total production. That would make gasoline scarcer and lift its price.
Once diesel tanks are full, Goldman calculates that every extra week of restrictions could add around 30 cents to the price of a gallon of US retail gasoline. Refiners' margins would be squeezed, and US processors would probably have reason to scale back output.
The effects would extend beyond America's borders. Cutting off US diesel exports would shrink supply abroad; Goldman sees European wholesale diesel gaining about $3 per barrel for each week the ban is in force. Drawdowns from Europe's strategic petroleum reserve could cancel out around half of that gain.
A ban would also create a lasting distortion in the market. After the curbs were lifted, US diesel would probably realign with world prices, pushing domestic diesel up and dragging prices in other regions down. Goldman argues refined products would end up more expensive than if no ban had been imposed and US refinery output had not fallen.
On the investment side, Goldman is still advising clients to hedge geopolitical risk by holding long positions in European gasoline. The bank cites fast-shrinking gasoline supplies, the chance that gasoline might later be added to US export curbs, and Europe's comparatively thin gasoline inventories, which are roughly four times smaller than its diesel stockpiles.
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