Sugar Rush Policymaking

When Affordability Meets Protectionism

The perception today is that it's rare to get bipartisan agreement, but in reality, these days Republicans and Democrats are converging all too often on policies public affairs professionals might prefer they didn't. That's because Republicans and Democrats are increasingly finding common cause around economic interventions that can be far more disruptive to business than partisan gridlock ever was.

Take for example the record $6.53 price tag on diesel even as U.S. refineries ship roughly 1.6 million barrels a day overseas, and ideological distance has shrunk remarkably fast. Iowa Democrat Josh Turek called for pausing diesel exports. Within days, Republican Sen. Chuck Grassley warned that “diesel prices ARE KILLING FARMERS INCOME,” GOP Senate nominee Ashley Hinson backed a pause, Senate Majority Leader John Thune expressed openness to an export ban, and President Trump said on September 22: “I’ve said let’s not send out the diesel.”

The immediate diesel push has been led mostly by Republicans, but the underlying instinct is hardly partisan. Progressive Rep. Ro Khanna reintroduced legislation in April that would automatically halt gasoline exports when prices rise above a specified level. Democrats including Sens. Ed Markey, Jeff Merkley, and Ron Wyden have pushed broader restrictions on U.S. fossil-fuel exports for years, and the Biden administration examined restrictions on gasoline and diesel exports during the 2022 price spike.

Now populist Republicans are arriving at much the same proposition: if Americans are struggling to afford something we produce here, why let it leave?

The politics bring a sugar high of low prices

The case for an export restriction starts with a real tension. American refineries are producing more distillate fuel than at any point since 2019, yet inventories earlier this month sat 13 percent below their five-year seasonal average. Strong overseas demand is part of the reason: four-week average exports were still about 1.6 million barrels per day in mid-September as refinery disruptions in Russia, China, and the Middle East tightened diesel supplies globally.

For politicians staring at $6-plus diesel, the arithmetic looks obvious: keep more of those barrels here and American buyers have more supply competing for them. And that could work initially. Gulf Coast refiners produce far more diesel than the surrounding market consumes, so restricting exports would build domestic inventories and put downward pressure on prices, particularly around the Gulf Coast and Midwest. That immediate payoff is precisely what makes the policy action so tempting.

Before the economics bring the sugar crash

The problem is, an export restriction does not create another barrel of diesel; it only changes where existing barrels can go. America can absorb displaced exports, but only until inventories build, margins fall, and refiners have less incentive to keep operating at today’s near-record rates.

That matters because refineries do not make diesel alone. Processing crude also produces gasoline, jet fuel, and other products, so cutting refinery runs to eliminate excess diesel reduces those supplies too. The American Petroleum Institute (API) makes precisely that argument, and independent S&P Global Energy CERA modeling confirms: under a complete three-month ban, refiners could eventually cut throughput by roughly 1.9 million barrels per day, or 12 percent. Morgan Stanley has likewise warned that the counterintuitive result could be higher gasoline prices.

The Trump administration is now confronting that contradiction in real time. After Trump publicly embraced the idea of an export ban, Energy Secretary Chris Wright—who came to government from the energy sector—warned that “the blunt tool of banning diesel exports definitely doesn’t work,” because storage would fill, refinery runs would fall, and gasoline and jet fuel prices could rise. By the weekend, the White House appeared to be moving away from a blanket prohibition, with officials weighing alternatives and Wright urging refiners to voluntarily keep more diesel at home. The political objective remains; the administration is now looking for a less disruptive way to achieve it, an indication of how rapid industry pushback can stem poorly considered initiatives.

Meanwhile, the global shortage does not disappear at the border. Removing the United States—currently the largest source of seaborne diesel exports—from an already tight market would push global prices higher, including across supply chains and U.S. markets that remain exposed to international fuel prices.

That is the sugar rush: more domestic diesel and lower prices up front, followed by market adjustments that begin eroding the benefits, and cause wider affordability challenges as well. 

The bigger story isn’t diesel

That is what makes this fight relevant well beyond refiners, farmers and truckers. The core political argument—we make it here, so Americans should get it first—is becoming increasingly familiar across economic policy.

Tariffs protect domestic producers from foreign competition. Buy American and domestic-content rules favor U.S. production. Export controls restrict where American technology can go. Foreign-investment restrictions limit who can own American assets. A diesel export restriction flips the direction of the barrier but follows a related instinct: use the border and government power to reshape outcomes global markets would otherwise produce.

These policies have different purposes and economic effects, and the parties still disagree substantially over trade and industrial policy. But the gap has narrowed even if they arrived there from different directions. Progressives remain comfortable intervening when markets produce outcomes they view as imposing unacceptable costs on consumers, workers, or communities, while the populist right has increasingly embraced tariffs, industrial policy and economic nationalism to deliver visible benefits at home.

These are the Twin Tides that have reshaped American politics over the past decade. With affordability colliding with a midterm election, they have even more room to converge.

What convergence is the risk

A $6.53 gallon of diesel is almost purpose-built for the politics of the Twin Tides. The pain is tangible, the target is easy to identify, the solution fits in a sentence, and any immediate price decline provides visible evidence that government action worked. The second- and third-order consequences arrive later through refinery economics, global prices, and supply chains that are much harder to explain.

For energy public affairs leaders, that is the warning sign. The diesel debate may be focused on refined products today, but the same political dynamics are already shaping policy across the energy value chain. Oil and gas companies face export restrictions, permitting fights, and affordability pressure. Utilities and power producers are navigating growing scrutiny over rates, reliability, and who pays for new infrastructure. Renewable developers face domestic-content requirements, sourcing rules, permitting battles, and pressure to prove that the energy transition delivers visible benefits to American consumers and workers.

Different technologies and business models, but an increasingly familiar political formula: an affordability, reliability, or security concern creates pressure for intervention; policymakers reach for trade rules, domestic-content mandates, permitting changes, cost-allocation decisions, or other seemingly straightforward levers; and traditional ideological objections become less reliable predictors of who will support pulling them.

That matters because the politics of energy are becoming less about a simple fossil-versus-renewable divide and more about which projects, technologies, supply chains, and costs can be framed as serving American consumers, workers, communities, and security. Companies across the sector increasingly have to understand not only where the parties disagree, but where populist and progressive pressures may unexpectedly converge.

This is what energy policymaking looks like when the Twin Tides have flooded our politics.

Diesel just happens to be where the water is rising now.

Trends in Energy is your weekly look at key trends affecting the energy industry, brought to you by the competitive intelligence experts at Delve Research. As the political and regulatory landscape continues to shift, reach out to learn how our insights can help you navigate these challenges.