Who would be exposed if U.S. bans diesel exports? Goldman weighs in

Investing.com -- Goldman Sachs told investors in a note Friday that a U.S. ban on diesel exports would have only limited direct effects on global growth, with Latin America most exposed, and would ultimately prove inflationary for U.S. consumers.

“Refined product margins have widened significantly since March, and the threat of a US diesel export ban has raised concerns around further price increases,” Goldman analysts wrote.

The bank’s commodities team estimates a ban would lower U.S. retail diesel prices by 25 cents a gallon for each week it is in place. That implies a modest 2 to 3 basis point drag on headline U.S. inflation after a month.

“But this small decline in inflation would likely reverse and ultimately turn inflationary for consumers after roughly two months, since our commodity strategists estimate that each week of a diesel export ban would raise US retail gasoline prices by $0.3/gallon once diesel storage capacity is exhausted,” they added.

Using global input-output tables, Goldman estimates a sudden cutoff of U.S. supply could lower GDP in Latin America by around 1%. It said inventory buffers and increased exports from elsewhere would dampen that impact.

Outside the Americas, the bank sees small direct effects on activity, given less reliance on U.S. imports and the likely rapid reallocation of supply.

Because diesel markets are global, Goldman expects supply to adjust quickly, leaving higher prices as the main economic impact. It estimates each sustained 10% rise in diesel prices adds 0.1 percentage point to global headline inflation and 0.03 points to core, with larger effects in emerging Asia and Europe.

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