LARRY KUDLOW: Getting rid of the IRGC and the Houthis is better than a Diesel price control ban

Price controls are always a bad idea. They create shortages, profit losses, and eventually much higher prices when the controls are finally lifted. So this administration idea of a diesel export ban, is a problem if it really goes through.

Think of it this way, President Trump would be taking some number of barrels per day of diesel fuel off the market. That’s what a ban is. I don’t know the exact numbers, but the American Petroleum Institute says that of the 8 million barrels of diesel fuel that is traded by sea, America supplies about 1.5 million barrels of diesel, that’s about 20 percent. 

So an export ban would take a big chunk off the market. And that will jack up even higher international prices. Because it’s an internationally traded commodity. There’s really no way around it. Here’s another problem with the diesel export ban. Diesel comes from export production. You can’t just stop producing diesel. If you enforce this ban, presumably it would end drilling and production of oil, because diesel is a distillate of oil.

Yet that includes another distillate of oil which is gasoline. If you knock down crude oil runs, in order to clear the 1.5 million barrels of oil a day diesel surplus that we currently export, gasoline production would fall by roughly between 550,000 and 750,000 barrels of oil per day. Some oil companies think that would translate roughly to a 30 cent hike in the price of a gallon of gasoline, which is not what we want.

So in other words, cutting back diesel for export, means cutting back oil, which means cutting back gasoline, which means shortages of gasoline and higher gasoline prices. Not to speak of the world price of diesel going up. So it would be pretty self defeating. By the way the Northeast will feel the brunt of this, because the Northeast and East Coast import all manner of fuel from overseas. So they’d get slaughtered. Maybe all those climate change greenies deserve it.

Now as I understand it, Energy Secretary Chris Wright, Interior Secretary Doug Burgum, and Treasury Secretary Scott Bessent all oppose this diesel export ban. On the other hand, Vice President Vance and some Republican senators favor the ban. The president may be leaning toward it, but I hear the final decision has not yet been made.

Back to the economics of it, we need to increase the nation’s refining capacity everywhere. We need more crude oil, gasoline, diesel, jet fuel, all of it. The administration has tried hard to streamline permitting rules and regulations, which is the key, but these things take time.

There may be 65 billion barrels of oil reserves in Venezuela, but lifting that is going to take time. Meanwhile, somehow I have a better solution to the diesel and oil price problem, and that is regime change in Iran, as the president hinted at in his historic United Nations speech yesterday.

And then, while we’re waiting for that, how about taking out the Houthis and reopening the Red Sea, that might get us another 2 million to 3 million barrels of oil coming to market. Getting rid of the Islamic Revolutionary Guard Corps is a lot better policy than price controls. Just saying.