"Refining" becomes the global energy bottleneckis the US close to an "export ban"?

Title context: "Refining" becomes the global energy bottleneckis the US close to an "export ban"? The two wars in Russia-Ukraine and the Middle East are simultaneously hitting the global refining system, triggering a shortage of diesel supply and a sharp price surge. The United States is under pressure to become the "last supplier," while calls are growing across the US political spectrum to ban exports in order to stabilize domestic fuel prices. Wall Street CN noted that US diesel retail prices exceeded $6 per gallon last week for the first time and climbed further to $6.45 on Friday, a record high. Rural Brazil, Libya and some African countries have already seen fuel station shortages, and this key fuel on which global industry, transportation and agriculture depend is facing a severe test. Against this backdrop, legislative moves to restrict exports are emerging within the US Congress. Representative Tim Burchett proposed a diesel export ban bill this week, and Senate Majority Leader John Thune said he is open to the proposal. Analysts warn that once the United States imposes an export ban, it will drive prices in the rest of the world even higher and may trigger a chain reaction of follow-up moves by major Asian exporters. The Middle East and Russia: after a decade of expansion, hit hard by war Over the past decade, Persian Gulf oil-producing countries and Russia spent heavily to expand refining capacity and sharply increased their share of the global diesel export market, but the outbreak of the two wars abruptly reversed this supply landscape. Kuwait National Petroleum Company built one of the world's largest refineries at Al-Zour, the UAE expanded the Ruwais refinery, Iraq opened a new refinery in Karbala, and Saudi Aramco built two refineries along the Red Sea coast. This series of investments more than doubled Middle East diesel exports between 2017 and 2025, and the region rose to become the world's largest diesel-exporting region with a 19% share of global exports, overtaking North America. Russia, meanwhile, increased its exports by one-third over the same period by upgrading existing refineries. However, after the joint US-Israeli strikes on Iran in February this year, passage through the Strait of Hormuz was disrupted, forcing Kuwait, the UAE and Iraq to sharply cut exports. Escalating Houthi attacks also reduced exports from Saudi Aramco's Red Sea refineries, which are precisely the main alternative route for bypassing the Strait of Hormuz. At the same time, Ukrainian drone strikes on Russian refineries continued to be effective, bringing Russian exports almost to a standstill. David Martin, senior oil market analyst at the IEA, said: We are witnessing what may be the tightest diesel market structure in history. Insufficient Western refining capacity makes it hard to fill the supply gap Large-scale refining investment in the Middle East and Russia long suppressed the profit margins of Western refiners, causing their capital investment to shrink continuously, and now they are unable to bear the burden in a time of crisis. Alan Gelder, senior vice president for refining, chemicals and oil markets at consultancy Wood Mackenzie, pointed out that when national oil companies build refineries, return on investment is often not the primary consideration; governments focus more on providing jobs and ensuring energy security. By contrast, major Western oil companies have not built a new refinery in nearly three decades, and more than ten refineries in the United States and Europe have been shut down since 2015. Gelder said: We see the major oil companies effectively reducing their exposure to the sector because actual returns on capital have consistently been poor. Gelder further cited a saying circulating in the industry: How do you turn a large fortune into a small one? Build a refinery. At present, although Western refineries are already operating near full capacity and have shifted output toward diesel production, reducing the share of gasoline and jet fuel, they still cannot effectively fill the supply gap left by the Middle East and Russia. The export ban debate: solving domestic urgency or harming the world Faced with soaring domestic fuel prices, calls in US political circles for an export ban are intensifying uncertainty in this global supply battle. Trump this week blamed the rise in diesel prices mainly on the Russia-Ukraine war, saying that "the global rise in diesel prices is mainly caused by the Russia-Ukraine war, not Iran." However, IEA data show that the volume of diesel blocked from the Persian Gulf is about three times the Russian shortfall, a clear discrepancy between the two judgments. Analysts warn that if the United States imposes a ban on diesel exports, prices in the rest of the world will rise further sharply and may prompt major exporters to follow suit, making an already tightening global diesel market even worse. As early as 2022, in a letter to then-Energy Secretary Jennifer Granholm, the American Petroleum Institute clearly pointed out that export restrictions would push up domestic fuel prices. A report released earlier this year by the Center for Strategic and International Studies, as well as studies by the Dallas Fed and Columbia University's Center on Global Energy Policy on crude oil export restrictions, all reached the same conclusion. The structural problem is the core obstacle. US refining capacity is highly concentrated along the Gulf Coast, and its infrastructure was designed for export markets in the first place. The pipelines that transport products from the region to other parts of the country are already running at or near full capacity, and tight global tanker capacity also limits the flexibility of domestic allocation in the United States. The Center for Strategic and International Studies said in its report: Faced with an unprofitable (or even loss-making) operating environment, Gulf Coast refiners will inevitably sharply cut refining activity, process less crude oil and ship out fewer refined products. This will lead to "domestic gasoline supply actually falling below the level that would have prevailed without a ban, partially or even completely offsetting the initial inventory build, and creating upward pressure on the very prices the ban was intended to suppress." This article is reprinted from "Wall Street CN," author: Bao Yilong; GMTEight editor: Yan Wencai.