The "crack spread," or the refiner's margin over the cost of crude oil, has skyrocketed from a typical $20 to an unprecedented $100 per barrel. This demonstrates that a severe shortage of refining capacity, not just the price of oil, is the primary driver of high diesel prices.

High global refinery outages are reducing demand for crude oil, keeping its price in check. However, this has created extreme tightness in refined products like diesel, with record-high price differentials. As refineries restart, the suppressed demand for crude will be unleashed, driving prices up.

A US oil export ban seems logical during a crisis, but it's counterproductive. American refineries are primarily configured for heavier crude oil, while the US shale revolution produces lighter crude that must be exported. Not all oil is fungible, making global trade essential for domestic refining.

The global energy crisis is misunderstood. There is ample crude oil; the critical shortage is in refining capacity, especially for medium-sour crude needed for diesel. This means prices for gasoline and diesel can skyrocket due to refinery constraints, even while crude oil prices remain stable.

Refineries are built with a fixed configuration to process specific crude oils into a set mix of products. They can run at full capacity, but their ability to adjust the yield of diesel versus other fuels like gasoline is minimal, typically only by a few percentage points.

The US primarily produces light crude oil, but its refineries are configured for heavier crude. The country exports its light crude and imports heavy crude to match its refining capacity. An export ban would create a massive mismatch and strand domestic production.

Tightness in the global diesel market is creating a powerful economic incentive for U.S. refineries to maximize diesel output. This forces them to deprioritize gasoline production, a highly unusual move right before the summer driving season. This production shift, combined with high exports, is rapidly draining U.S. gasoline inventories.

While banning US oil exports would initially crash domestic prices, it would quickly cause an overflow of products like diesel in the Gulf Coast. Refineries would then be forced to cut production, ultimately creating shortages of other fuels like gasoline on the East Coast and disrupting the entire system.

The risk from a potential US diesel export ban extends beyond countries directly importing from the US. It would disrupt the entire global product market, creating price pressures for any emerging market nation reliant on refined product imports, regardless of their primary supplier.