By Jarrett Renshaw and Nicole Jao
WASHINGTON/NEW YORK, Sept 24 (Reuters) - US Energy Secretary Chris Wright has contacted executives at several major American refiners in recent days to gauge support for a voluntary restriction on diesel exports as the Trump administration searches for an alternative to a short-term ban, according to three people familiar with the discussions.
The effort to enlist companies voluntarily underscores the limited options available to the White House amid surging fuel prices
that are pushing inflation higher and beginning to ripple through the broader economy as crucial November midterm elections approach.
The push to restrict diesel exports also creates a potential clash with shareholders of refiners that have enjoyed bumper profits this year.
President Donald Trump's administration is under political pressure to lower diesel prices, but more aggressive measures such as an export ban could disrupt refinery operations and raise the price of other fuels, leaving officials searching for ways to increase domestic diesel supplies without creating new problems elsewhere. The US is the world's largest diesel exporter.
Trump said on Tuesday that he supported restricting diesel exports, a move that surprised senior officials and kicked off a search for alternative measures. Speaking in New York on Tuesday, Wright said banning exports was a bad idea and he preferred a voluntary effort, but did not provide specifics.
The people familiar with the discussions did not name the companies contacted by Wright and it was not immediately clear what type of voluntary reductions the administration was seeking or how such an arrangement would be monitored or enforced. It was also unclear how the request was received by an industry that is benefiting from strong demand and record export revenues.
"The Trump administration, including Secretary Wright, continue to work closely together as they consider a variety of options to help lower energy costs for the American people," said Department of Energy spokesman Ben Dietderich, when asked about the administration's effort to get refiners to voluntarily limit exports.
“Ultimately, President Trump will make the final decisions,” he added.
US diesel prices have climbed to about $6.52 a gallon, according to AAA, as disruptions tied to the wars in Iran and Ukraine have tightened global supplies. US diesel inventories were below 97 million barrels last week, about 13% below the five-year seasonal average, according to Energy Information Administration data.
SOME REPUBLICANS CALL FOR BAN
Trump's call for restrictions follows growing pressure from his fellow Republicans in states reliant on farming and other diesel-intensive industries, where soaring fuel costs have become a political issue ahead of the midterm elections. Republican lawmakers including Iowa Senator Chuck Grassley and candidates in competitive races have called for restricting exports as a way to ease costs for farmers and other diesel users.
The American Petroleum Institute and more than 30 business, energy and manufacturing groups urged Trump on Wednesday to reject calls to limit diesel and other fuel exports.
The industry argues that US refiners, particularly those along the Gulf Coast, produce more diesel than the region consumes and rely on exports as an outlet for the surplus. Restricting those sales could fill storage tanks and force refiners to reduce the amount of crude they process, cutting production of diesel as well as gasoline and jet fuel.
Alan Gelder, senior vice president for oil markets at consultancy Wood Mackenzie, said it could also increase the need for gasoline imports, potentially at higher costs.
"The irony of a US diesel export ban is that it would likely increase costs for American consumers," Gelder said.
"Cutting crude runs to manage the oversupply would shift the cost burden from diesel to gasoline, meaning a policy designed to bring relief at the diesel pump could end up driving prices higher at the gasoline pump."
An export ban could lower prices in the short-term, but the drop could be temporary if refiners cut production to match demand, according to Bjorn Markeson, an economist at economic data firm IMPLAN.
One industry source said enthusiasm for any kind of voluntary program was limited.
Reuters contacted major US refining companies, including Marathon, Valero, Chevron and ExxonMobil, to ask about the calls for an export ban and their support for voluntary restrictions. Those companies did not immediately respond.
Phillips 66 declined to comment on whether the company has been approached by the Energy Department.
Citgo said it had provided information to the administration and warned restrictions could have significant consequences.
“The consequences of a potential diesel export ban are serious, particularly for refiners in the US Gulf Coast,” the company said.
(Reporting By Jarrett Renshaw in Washington and Nicole Jao in New York; Editing by Nathan Crooks and Nia Williams)
