The European Commission reacted with "concern" to reports this week that US President Donald Trump could prevent diesel from reaching the global market, warning the move would bring even higher fuel prices across Europe and hurt the US as well.
The warning came as markets fell sharply. The ASX 200 closed 0.7% lower, while Wall Street's S&P 500 dropped 0.8%. Brent crude oil climbed 4.2% to $US103.37 a barrel, with a barrel now costing more than $US103 after Mr Trump's comments.
MST Marquee head of energy research Saul Kavonic told ABC's The Business program that an export ban would be "probably the most worrying development we have seen in global fuel markets since the war began when it comes to Australia's vulnerability". He warned that Australia, the world's largest importer of diesel, could face rationing within weeks and prices topping $4 a litre — a 50% increase from current levels.
"If the US goes down this path, and particularly if they do it in a very severe way, I think we'll be looking at that in a matter of weeks," Mr Kavonic said.
Mr Trump said on Tuesday he backed the idea of banning diesel exports, which is being floated by some Republican politicians ahead of the midterm elections in November. "I've said let's not send out the diesel. We make a lot of diesel … I've called for it. I've called for it within my people," he told reporters before a meeting with Ukrainian President Volodymyr Zelenskyy.
The US exports roughly 1.3 million barrels of diesel a day, about one-quarter of its refining output. US Treasury Secretary Scott Bessent confirmed the government was examining whether a full or partial ban was feasible.
Australia does not directly import diesel from the US, but the flow-on effect on global markets would be severe. The country accounts for 1% of global fuel demand but 10% of seaborne diesel imports, and its economy is heavily weighted toward agriculture and mining, both diesel-dependent industries.
Mr Kavonic said any ban could force the Australian government to escalate its National Fuel Security Plan to stage 3 — "practical measures to reduce fuel demand" — and stage 4, which includes directing fuel supply to ensure fair allocation, generally considered rationing.
The crisis has been building for months. Both the Middle East conflict and the Ukraine-Russia war have taken major refineries offline, while Russia and China have stopped exporting refined fuels, forcing the US to pick up the slack.