Prediction market traders assign low probabilities to a US diesel export ban, with Polymarket at 11% and Kalshi at 17%, despite ongoing White House discussions. This skepticism contrasts with a Dallas Fed survey where 48% of executives expect elevated diesel prices for over a year.

The fuel crisis, triggered by conflicts in Iran and Ukraine, has pushed U.S. diesel to record highs. AAA reported the average price at $6.4139 per gallon on Wednesday, a 73% increase from a year ago, while Reuters noted a recent peak of $6.53 per gallon. The divergence between market expectations of policy action and the structural supply constraints highlighted by industry executives underscores the complexity of the current energy landscape.

Market sentiment on export restrictions

Polymarket places the probability of the U.S. announcing a broad diesel export ban by October 31 at 11%, with more than $181,000 traded on the contract. The platform specifies that restrictions such as quotas, tariffs, or destination-specific bans would not qualify unless they effectively prohibit exports. Separately, Kalshi traders estimate the chance of a ban before Election Day at 17%.

President Donald Trump has kept the option alive, stating his administration discusses the issue "every day." He acknowledged that a ban could lower diesel prices while making gasoline more expensive. Energy Secretary Chris Wright has opposed a blanket ban, warning it could hurt refinery efficiency and push gasoline and jet fuel prices higher. Instead, the administration is pressing France and Germany to release emergency diesel reserves, a move that would add global supply without forcing U.S. refiners to stop exporting.

Economic impact and analyst forecasts

Goldman Sachs Group Inc. (NYSE: GS) estimates that a ban could initially push U.S. diesel prices down by about 25 cents per gallon each week, roughly 4% from recent levels. However, Goldman warns this effect could reverse once storage fills. Refiners may then have to cut production, which could push retail gasoline prices about 30 cents per gallon higher.

Jefferies downgraded major U.S. refiners Valero Energy Corp. (NYSE: VLO) and Marathon Petroleum Corp. (NYSE: MPC) to Hold on September 22, citing a possible diesel export ban as one of the biggest risks facing the refining industry. The logic is that U.S. refineries produce both fuels from the same crude oil; losing overseas buyers for excess diesel fills storage tanks, forcing plants to process less crude and thereby reducing gasoline output.

Political stakes and industry opposition

The fuel crisis threatens the Republican Party's midterm election campaign. Tennessee Republican Tim Burchett warned that the GOP could lose its majority due to the situation, and an industry insider revealed that an export ban was "absolutely getting pretty close to movement" after top Republicans from farming states requested action.

However, more than 30 industry groups, including the U.S. Chamber of Commerce, urged Trump not to restrict diesel exports. They warned that limits could reduce fuel production, tighten supplies, and raise costs. They noted that U.S. refineries are operating at full capacity amid a 10% decline in global refining capacity. Treasury Secretary Scott Bessent discussed the issue with Reform U.K.'s Robert Jenrick, who urged Washington to avoid a ban or exempt the U.K.

What the numbers show

The combined data reveals a tension between political pressure and market reality. While 48% of oil and gas executives expect long-term high diesel prices, prediction markets assign only 11-17% probability to the most direct intervention: an export ban. This suggests traders believe the administration will opt for less disruptive measures like reserve releases or voluntary limits. Furthermore, Goldman Sachs' forecast that a ban could eventually raise gasoline prices by 30 cents per gallon aligns with the Dallas Fed finding that 36% of executives already expect prolonged gasoline price elevation, highlighting the risk that solving the diesel shortage could exacerbate broader fuel inflation.

Senate Majority Leader John Thune stated that the Iran war has "trumped everything else" for voters, with soaring diesel prices deepening affordability concerns ahead of the Nov. 3 midterm elections. National diesel averages reached $6.4531/gallon on Sept. 28, approaching the record $6.5276 seen earlier in the month.

Political Response and Expert Warnings

Thune noted that races are now focused on affordability issues like diesel prices in Iowa, Kansas, and Nebraska. This aligns with Senate Majority Leader John Thune’s previous suggestion that the US may explore banning diesel exports if supply permits. Former Congresswoman Marjorie Taylor Greene backed the plan on X, calling it an “America First” move and slamming oil companies for seeking “huge profits.”

However, Economist Justin Wolfers argued in a blog that a temporary ban “doesn’t force refiners to flood America with bargain diesel tomorrow” and would instead squeeze refining margins. “Diesel isn’t expensive because America exports it. Diesel is expensive because the world is short of diesel,” Wolfers wrote. Energy Secretary Chris Wright previously said a ban would be ineffective and could raise gasoline and jet fuel prices by forcing refiners to cut production once storage fills.

Trump Weighs Export Ban Seriously

President Donald Trump said he is considering a diesel export ban “very seriously” and that the US may implement it. Speaking to reporters near Chicago, he acknowledged that while the move aims to address high diesel prices, it could cause a small rise in gasoline prices. He pointed to new refineries under construction nationwide, though those won’t come online for about a year.

GasBuddy analyst Patrick De Haan noted that Trump’s admission regarding gasoline price increases shows “some awareness of what analysts have been cautioning.” De Haan criticized the potential move, warning it would send a “chilling” signal to the market and might chase away traders. He argued that refinery expansions, not government control over sales, would strengthen America.

Global Context and Price Forecasts

The call for caution comes as global supply chains face strain. Russia imposed a diesel export ban until September 30. Reports suggest President Donald Trump asked Ukrainian President Volodymyr Zelenskyy to halt strikes on Russian oil assets to prevent further disruptions. Tensions have intensified with reports that Yemen’s Iran-backed Houthis may have struck Saudi Arabia’s East-West pipeline.

De Haan projected that national average diesel prices could reach $7 in the coming days. He cited a noticeable jump in fuel costs within 48 hours, driven by the Iran war and the Russia-Ukraine conflict.

Oil, Gas Movement

According to data from the American Automobile Association (AAA), the national average price of gasoline was $4.4798/gallon, roughly flat from a week ago but up 43% from $3.1375 a year ago. The national average for diesel was $6.4709/gallon, down slightly from $6.51 a week ago but up 76% from $3.6876 a year ago. The Energy Information Administration’s latest weekly reading put U.S. on-highway diesel at $6.529 on Sept. 21, with the Midwest at $6.680.

West Texas Intermediate (WTI) crude futures for November rose 1.41% to $93.67. Brent crude futures for November gained 1.68% to $102.03. Oil ETFs also reported growth, with the ProShares Ultra Bloomberg Crude Oil (UCO) ETF rising 1.88% to $52.70 and the United States Oil Fund (USO) gaining 1.59% to $150.51.

White House Has Limited Options

The reality is that the White House has limited options to lower diesel prices ahead of the midterm elections. In a statement this week, Trump will support banning diesel exports, a move he hopes will lower prices. However, analysts and lobbying groups have warned that such a ban will lead to higher prices in the US.

Sen. Chuck Grassley renewed calls for a temporary diesel export ban, saying high prices were "killing farmers’ income." RSM chief economist Joseph Brusuelas stated, "The price of diesel touches everything in our economy that needs to move," including groceries. The US is the biggest diesel exporter in the world. As such, banning its supply would lead to higher international prices, which would also affect trends in the US. Trump is also considering suspending taxes on diesel. Such a move would have a minimal impact since the federal excise tax rate is just $0.24. He is also considering removing restrictions on the sale of the dyed red variety of diesel that is usually restricted to off-road use. De Haan warned that broader use of tax-exempt dyed diesel "does nothing to improve supply or impact price."

Diesel will retreat once crude oil and transportation prices continue falling. This will only happen when the three wars: US-Iran, Saudi Arabia-Houthi, and Russia-Ukraine end. Even when this ends, the process of repairing the damaged refineries may take longer.

Polls Show Cost-of-Living Concerns Weighing on Trump

The political backdrop remains difficult for Republicans. A Reuters/Ipsos poll completed Sept. 20 found Trump’s approval at 32%, while just 17% approved of his handling of the cost of living. Registered voters favored Democrats over Republicans 43% to 35% in a generic midterm question, though national polling does not capture individual state and district races.

A separate AP-KFF survey of more than 2,000 rural registered voters last week found about half said the economy had worsened since Trump returned to office, while groceries, gas and healthcare ranked among their biggest concerns.

What the Numbers Show

The divergence between political intent and market mechanics is evident. While Thune and Grassley view an export ban as a lever to reduce domestic costs, economists like Wolfers and Sahm highlight the risk of exacerbating volatility. With diesel prices up 76% year-over-year and forecasts pointing toward $7, any restriction on exports could tighten available supply further. The potential shift to jet fuel production or reduced refining margins suggests a ban might not lower diesel prices but could instead distort broader energy markets. Furthermore, the low approval rating for cost-of-living handling (17%) underscores the political stakes of energy policy.