President Donald Trump Is "Very Seriously" Thinking About Curbing Diesel Exports, but the Repercussions Could Be Disastrous

Throughout most of Donald Trump's presidency, the stock market has been virtually unstoppable. The mature-stock-driven Dow Jones Industrial Average (DJINDICES:^DJI), benchmark S&P 500 (SNPINDEX:^GSPC), and innovation-inspired Nasdaq Composite (NASDAQINDEX:^IXIC) have delivered higher average annual returns under Trump than under most other presidents since the late 1800s.

But the outperformance of Wall Street's major stock indexes isn't accurately reflecting many of the challenges facing the U.S. economy at present. Chief among these headwinds is Trumpflation (inflation that's been directly driven by Trump's policies).

While the president believes he has a quick fix for what ails consumers' and businesses' wallets, there's a very high probability that it would backfire.

Image source: Official White House Photo by Molly Riley.

Energy prices are skyrocketing, prompting Trump to consider a partial or full diesel export ban

Before digging any further, let's set the record straight: modest inflation (rising prices) is normal when the U.S. economy is growing. Businesses possessing decent pricing power over their goods and services are what we'd expect to see in a healthy economy.

For 66 months and counting, the prevailing inflation rate has been above the Federal Reserve's long-term 2% target. Clearly, this isn't all of President Trump's doing. However, the surge of inflation that we've witnessed since February, from a reported annualized rate of 2.4% to a peak of 4.2% in May, can be almost entirely attributed to the president's policies.

While the artificial intelligence (AI) infrastructure build-out and the president's tariffs are both modestly contributing to elevated inflation, it's the Trump-led Iran war that's been the primary culprit.

Shortly after military operations commenced on Feb. 28, Iran shut down the Strait of Hormuz to virtually all commercial vessels, disrupting the flow of a fifth of the world's crude oil supply. The largest energy supply disruption in modern history sent gas prices soaring at the fastest pace in 30 years. But the biggest impact has arguably been on diesel prices, which reached a national record high of $6.53 per gallon on Sept. 22, per AAA.

🇺🇸 LATEST: President Trump says he is “THINKING VERY SERIOUSLY” about banning U.S. diesel exports.

“It can oftentimes lead to a little bit of an increase on gasoline for cars, so we’re looking at it very seriously, we may do it.” pic.twitter.com/DwJnRhqCcN

— Coin Bureau (@coinbureau) September 28, 2026

In an effort to lower surging diesel prices, President Trump has floated support for a full or partial ban on diesel exports. Two weeks ago, he told reporters:

I've said, let's not send out the diesel. We make a lot of diesel. I've called for it within my people. I've been talking about it.

But just this past week, he doubled down on the idea of curbing U.S. diesel exports. On Sept. 27, President Trump proclaimed:

We're thinking about it [an export ban on diesel] very seriously.

Trump's thesis in partially or fully banning diesel exports is that it would create a domestic surplus of distillate (diesel and heating oil), shifting supply-versus-demand dynamics and rapidly lowering prices.

According to the Energy Information Administration, U.S. refiners produce about 5.3 million barrels of distillate daily, while domestic consumption totals around 3.7 million barrels. Approximately 1.5 million barrels of diesel are exported from the U.S. to international markets each day. Curbing these exports would lead to a surplus.

Economics teaches us that when the supply of a good outstrips demand, its price will decline.

Image source: Getty Images.

The repercussions of fully or partially banning diesel exports would be catastrophic

On paper, President Trump's logic is sound. If the U.S. can create a diesel surplus, domestic prices would quickly decline. But there's a big difference between how things look on paper and how they turn out in the real world.

Initially, a full or partial export ban would likely lower diesel prices. However, this perceived victory would be very short-lived. The repercussions of curbing diesel exports are threefold, and they'd all potentially be catastrophic for the wallets of consumers and businesses, and even the stock market.

To begin with, the president and his administration aren't considering the response from U.S. refiners if an export curb is put into place.

Aside from the fact that distillate storage is finite, refiners won't continue producing a surplus if diesel prices and their margins keep spiraling lower. America's refining giants, such as ExxonMobil (NYSE:XOM) and Chevron (NYSE:CVX), would simply adjust their production to meet domestic demand. Without a building surplus, any initial price relief would quickly dissipate.

GOLDMAN: DIESEL EXPORT BAN COULD PUSH GASOLINE PRICES HIGHER

Goldman Sachs warns a U.S. diesel export ban could lower domestic diesel prices but raise gasoline prices.

Cheaper diesel could encourage refiners to cut production, reducing gasoline supply because the fuels are…

— *Walter Bloomberg (@DeItaone) September 23, 2026

Secondly, a Goldman Sachs (NYSE:GS) research note pointed out that "diesel, gasoline, and jet fuel are largely produced together." In other words, if U.S. refiners choose to scale back diesel production to meet domestic consumption in the wake of a full or partial export ban, we'd likely also observe a decline in gasoline production.

If the gasoline refining output drops in lockstep with distillate production, gas prices would be expected to rise. That's terrible news for consumers.

The third impact of curbing diesel exports would be seen in the international markets. Taking away in the neighborhood of 1.5 million barrels of diesel fuel per day would create an epic supply disruption. It would also lead to higher shipping costs.

The uncomfortable reality is that there isn't a quick fix to sky-high diesel prices. The end of the Iran war would be the best possible outcome for energy markets, but challenges would remain. More specifically, it would take several months for energy infrastructure in the region to ramp up anywhere near full capacity.

While record-high diesel prices are bad news on several fronts for the Dow Jones Industrial Average, S&P 500, and Nasdaq Composite, curbing diesel exports in any capacity to influence prices would be disastrous.

Sean Williams has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Chevron and Goldman Sachs Group. The Motley Fool has a disclosure policy.