Subscribe to The Y’all — a weekly dispatch about the people, places and policies defining Texas, produced by Texas Tribune journalists living in communities across the state.
Recommended Videos
The Trump Administration is pushing for a 90-day ban on diesel exports intended to rapidly lower climbing fuel prices for consumers, a proposal that, if enacted, will hurt the constellation of Texas refineries in the Gulf Coast and deal a blow to the state’s economy, industry leaders said.
Politico first reported the news of the ban.
Texas refineries turn millions of barrels of crude oil into diesel and jet fuel daily for several industries, such as agriculture and aviation. They also sell the product abroad.
Texas contributes about a third of the nation’s diesel, processing about 6.3 million barrels a day, according to the Energy Information Administration. About 1.5 million barrels are sold overseas.
Now, the Trump administration is pushing companies to curtail such exports and keep that fuel at home to increase supply and lower volatile fuel prices amid the U.S.-Iran war, as rising gas prices become a political liability ahead of the November midterm elections. On Monday, Gov. Greg Abbott issued a disaster declaration that allows the use of dyed diesel, which is functionally the same as diesel but reserved in farming and construction, to ease prices.
The proposal has put President Donald Trump at odds with an industry he pledged to bolster by cutting regulation during his presidential campaign. Curtailing exports, many in the industry fear, will force them to downsize operations and lessen supply. Doing so could devastate parts of the energy sector, the bedrock of the Texas economy that employs hundreds of thousands of workers and pays billions in taxes.
“Banning exports of diesel would cripple domestic jobs, lead to fuel shortages here at home and put power in the hands of China and Russia by forcing our allies to turn to those countries to meet their needs,” said Todd Staples, president of the Texas Oil and Gas Association. “America’s energy leadership is needed now more than ever, and the best way to protect Texas and American consumers is to encourage continued investment in infrastructure which means more production, pipelines, processing and refining.”
“Global disruptions to the supply chain will eventually be resolved and Texas will emerge stronger and consumers better protected than ever. A ban today means a weaker America tomorrow and should be rejected by all Americans.”
CITGO, a major Texas refiner with operations in Lake Charles, Louisiana, and Corpus Christi, said it represents roughly 690,000 barrels a day of refining capacity, and it relies on domestic and international markets to balance production and maintain reliable operations.
“An immediate ban on diesel exports would eliminate outlets for approximately 1.3 million barrels-per-day of U.S. diesel and create a significant product containment challenge across the U.S. Gulf Coast, which supplies 90% of these exports,” a CITGO spokesperson said in a statement. “The product containment challenge would force Gulf Coast refineries to reduce crude runs which, in turn, impacts overall fuel supply.”
Most of the crude oil that comes from Texas is known as light crude, a chemically complex and expensive liquid that, when refined, turns into diesel and jet fuel and is the cheapest way to make gasoline, said Ramanan Krishnamoorti, vice president of energy and innovation at the University of Houston. Refineries also import oil from Canada and Venezuela, called heavy crude, which is better to process into diesel. The fuel is used for heavy duty vehicles, such as trains and trucks.
In the months since the war broke out, Gulf Coast refineries have been producing fuel at full capacity, Krishnamoorti said. But if those companies are unable to sell and ship the product elsewhere, the refiners will begin to downsize their operations and process less diesel fuel, thus dwindling the supply. Price increases will follow as a result.
“Once they start to see that they’re not going to be able to maximize profits, they have less incentive to find ways to keep their refineries going at full strength,” Krishnamoorti said. “If they start to go offline … you start to see a roll-on impact on gasoline prices because it will be in short supply.”
Winding down operations will impact the processing of other kinds of fuel, such as jet fuel, said Jack Balaggia, executive director of the KBH energy center at the University of Texas at Austin. And the country is lacking the infrastructure, such as pipelines, to transport the diesel across state lines for U.S. customers, he said.
“When you quit making as much diesel, you also quit making as much jet fuel and gasoline so those prices are going to go up when the storage facilities fill up,” Balaggia said at the Texas Tribune Festival. “It sounds like a simple problem and a very simple solution, but it is not. It is very complex … We live in a world market for crude oil and crude oil product, you cannot isolate yourself from the world market. Putting all rhetoric aside, it’s not going to work.”
Disclosure: The University of Texas at Austin has been a major financial supporter of The Texas Tribune. University of Houston has been a financial supporter within the past five years. The Texas Tribune is a nonprofit, nonpartisan news organization that is funded in part by donations from members, foundations and corporate sponsors. Financial supporters play no role in our journalism. Find a complete list of them and more information about our financial and disclosure policies here.