Morgan Stanley: US diesel export ban could raise gasoline prices

Morgan Stanley said that the U.S. ban on diesel exports could push up domestic gasoline prices, as full storage tanks may lead to lower refinery operating rates and reduced gasoline production.

Analysts, including Martin Rats, explained in a note reported by Bloomberg that the ban could force U.S. refineries to cut refining operations by approximately two million barrels per day.

According to the bank, “Even if refineries adjust their output to maximize gasoline share, supplies of this fuel would still decline by about 650,000 barrels per day. Conversely, diesel prices would fall within the United States and rise in external markets, with Europe suffering the greatest damage.”

The average U.S. retail price of diesel jumped to a record high of $6.528 per gallon this week, compared with $3.76 in late February, before the U.S. and Israeli attack on Iran.

What does this mean? The ban on diesel exports could backfire in the U.S. fuel market, as a domestic diesel surplus may prompt refineries to lower operating rates, thereby reducing gasoline production and driving up its price.