Trump weighs US diesel export curbs as fuel prices surge before midterms

Donald Trump has floated curbs on US diesel exports as soaring fuel prices squeeze voters before the midterms. The move could deepen a global supply crunch and leave countries such as Australia more exposed.

In Short

• Middle East disruptions and Russian curbs have tightened global diesel supplies
• Australia faces acute exposure because local diesel costs track volatile world markets
• Lower US pump prices could leave refiners with excess fuel stocks

US President Donald Trump has called for a ban on diesel exports from the United States as record-high fuel prices at home weigh on his public support ahead of the midterm elections. While the White House has softened the President's remarks, Energy Secretary Chris Wright has said the administration is considering restrictions.

The proposal comes at a time of rising tensions in the Middle East and critically low global fuel reserves. Any move by the US, the world's biggest diesel exporter, could have wide effects on the global economy, including in Australia, which is the largest per capita consumer of diesel among developed nations.

Trump returned to office in January 2025 after promising to control inflation, bring down fuel prices and end foreign wars. But with the US midterm elections six weeks away, voters see him moving backwards on all three fronts. Inflation is at 3.4 per cent, above the Federal Reserve's 2 per cent target, and the Fed has raised interest rates for the first time in three years, adding to pressure on households and small businesses.

Fuel prices have risen 50 per cent since the start of the US-Iran conflict, putting heavy pressure on households, especially in Republican strongholds across rural America. Voters are also unhappy with the administration's decision to go to war with Iran. The conflict has become the least popular war in US history, narrowly overtaking Vietnam, and Trump's approval rating has fallen to a career low of 32 per cent. Republicans are widely expected to lose their slim majority in the House, and there is also a growing possibility they could lose the Senate, which would sharply limit Trump's ability to pass legislation.

A US export ban would come at a time when global diesel markets are already under severe strain. The US produces about 20 per cent of the world's diesel supply, while another 20 per cent of global oil supply is blockaded in the Strait of Hormuz. Saudi Arabia's attempts to reroute oil exports through its East-West pipeline towards the Red Sea have been disrupted by an Iran-backed Houthi militia, which launched a drone strike on the pipeline and is setting up a separate blockade on the Red Sea.

At the same time, Ukraine's continuing attacks on Russian oil production have led President Vladimir Putin to extend Russia's full ban on diesel exports. Trump has asked Ukraine to stop targeting Russian oil refineries. Global fuel reserves are also running low as the northern hemisphere moves towards peak winter fuel demand.

The article says a ban on US diesel exports would push prices higher and hit the global economy. Australia would be especially exposed. Although Australia does not import diesel from the US, apart from an emergency shipment sent in March, it remains vulnerable to global price movements if the US restricts exports. That could even lead to fuel rationing. The move could also hurt the US, because lower domestic prices would leave the country with excess supply and could force refineries to slow production. That is why the White House has ruled out an outright ban, even though other options are still being considered.

Among those options, Wright has pointed to a plan under which American fuel markets would voluntarily redirect exports to the domestic market. While details are still awaited, that could include financial incentives for fuel producers, possibly through tax concessions. The global diesel shortage could also come up at the Trump-Xi summit in Washington DC, which began this week. China is also a major diesel producer, and cooperation to lift supply could help avoid a deeper crunch. The White House could also consider an export quota to cap diesel shipments overseas, which might reduce the risk of flooding the domestic market. Such a quota could also be applied selectively to different countries, giving the US another lever in trade talks.

For now, the focus remains on how Trump responds to rising fuel prices at home while global diesel markets remain under pressure. Any US decision on exports could affect domestic politics, global supply and countries such as Australia that are highly exposed to diesel price shocks.

With PTI Inputs

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