(WO) — American Petroleum Institute (API) President and CEO Mike Sommers is warning that proposed restrictions on U.S. diesel exports could reduce domestic refinery output and further tighten global fuel supplies amid record-high diesel prices.
API President and CEO Mike Sommers
In a Wall Street Journal opinion column published Sept. 24, Sommers argued that current diesel shortages stem from disruptions to global refining and energy flows rather than excessive U.S. exports. API has separately said that restricting exports could force Gulf Coast refiners to reduce runs because the region produces more diesel than it consumes and cannot easily redirect all surplus fuel to other U.S. markets.
Sommers pointed to disruptions in the Strait of Hormuz and attacks on Russian refineries as major contributors to tighter global fuel supplies. Diesel prices have climbed above $6/gal in the U.S., while inventories have fallen to historically low levels.
According to Sommers, the Gulf Coast accounted for roughly 90% of U.S. distillate exports last year. Because infrastructure and shipping constraints limit the ability to move surplus Gulf Coast fuel to other domestic regions, he argued that an export ban could cause storage to fill and ultimately force refiners to process less crude.
Sommers cited S&P Global estimates that a ban could reduce U.S. refinery runs by 1.9 MMbpd and gasoline production by as much as 750,000 bpd. Reduced refinery runs would also affect production of jet fuel and other refined products, he said.
Instead of restricting exports, Sommers called for measures aimed at increasing supply and improving domestic fuel movements. Those include extending Jones Act waivers, easing certain Renewable Fuel Standard provisions, coordinating reserve releases with allies and pursuing permitting reforms for energy and transportation infrastructure.
A Jones Act waiver currently facilitating domestic energy shipments has been extended through Nov. 15.
Sommers also called for efforts to restore energy flows through the Strait of Hormuz and argued that increasing global fuel availability would provide more durable relief than restricting U.S. exports.
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