Goldman Warns Diesel Export Ban Would Send Gasoline Prices Higher
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Goldman Sachs warns that a U.S. diesel export ban would temporarily lower diesel prices but eventually push gasoline prices higher as storage capacity fills, with spillover effects expected in European energy markets.
If the United States institutes a ban on diesel fuel exports, Goldman Sachs analysts estimate it would initially push prices lower. The effect, however, would only continue until storage space fills up, the bank warned.
Amid reports on the possibility that Washington may suspend diesel fuel exports for a period of 90 days, the investment bank’s analysts calculated that the move, once in effect, could reduce diesel fuel prices by about $0.25 per gallon every week—until diesel storage capacity fills. Once that happens, prices at the pump will start climbing higher again, but this time for gasoline, Reuters reported, citing the bank.
“The longer a diesel export ban lasts, the more disruptive it would likely be by putting upward pressure on gasoline prices because diesel, gasoline, and jet fuel are largely produced together,” Goldman Sachs’ commodity analysts said in a note. According to them, once available storage space fills with gasoline, gasoline prices could add $0.30 per gallon per week.
Meanwhile, the diesel ban would also push up fuel prices in Europe as well, as the continent is the biggest buyer of U.S. energy commodities. Goldman estimates the price effect at $3 per barrel of diesel, equal to about 2% of current prices. An emergency inventory release could cushion the blow by about 50% of that price rise, according to the bank.
“Once a diesel ban is lifted, US diesel prices would likely reconnect with prices elsewhere, including Europe, putting upward pressure on US diesel prices and downward pressure on prices abroad,” the analysts also said.
This raises the question of whether there is even a point to a diesel export ban, if its immediate effect would be short-lived, would then turn adverse on gasoline prices, and eventually, once the ban is lifted, diesel prices would rebound.
By Irina Slav for Oilprice.com
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Amid reports on the possibility that Washington may suspend diesel fuel exports for a period of 90 days, the investment bank’s analysts calculated that the move, once in effect, could reduce diesel fuel prices by about $0.25 per gallon every week—until diesel storage capacity fills. Once that happens, prices at the pump will start climbing higher again, but this time for gasoline, Reuters reported, citing the bank.
“The longer a diesel export ban lasts, the more disruptive it would likely be by putting upward pressure on gasoline prices because diesel, gasoline, and jet fuel are largely produced together,” Goldman Sachs’ commodity analysts said in a note. According to them, once available storage space fills with gasoline, gasoline prices could add $0.30 per gallon per week.
Meanwhile, the diesel ban would also push up fuel prices in Europe as well, as the continent is the biggest buyer of U.S. energy commodities. Goldman estimates the price effect at $3 per barrel of diesel, equal to about 2% of current prices. An emergency inventory release could cushion the blow by about 50% of that price rise, according to the bank.
“Once a diesel ban is lifted, US diesel prices would likely reconnect with prices elsewhere, including Europe, putting upward pressure on US diesel prices and downward pressure on prices abroad,” the analysts also said.
This raises the question of whether there is even a point to a diesel export ban, if its immediate effect would be short-lived, would then turn adverse on gasoline prices, and eventually, once the ban is lifted, diesel prices would rebound.
By Irina Slav for Oilprice.com
More Top Reads From Oilprice.com
Why Record Heat Failed to Lift U.S. Natural Gas Prices
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