Running out of levers: The temptation of export controls

US refiners are earning extraordinary margins even as consumers face sharply higher fuel prices, leaving Washington with few remaining options after already deploying many of its conventional policy levers. Supply diplomacy could restore product to the global market, while export controls could lower some domestic prices but risk regional imbalances, lower refinery runs, tighter global supply and damage to the U.S. reputation as a reliable energy supplier.

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Running out of Levers: The Temptation of Export Controls

American refiners are having one of their most profitable years on record at precisely the moment American consumers are facing sharply higher fuel prices. The national average for regular gasoline is $4.15/gallon, up nearly 30% from $3.20 a year ago, while diesel is approaching $6/gallon, up almost 60% from $3.70 a year ago.

President Trump summoned refinery executives to the White House last week to discuss what could be done to bring those prices down. The meeting followed his comments a month earlier that Chevron and Exxon were making "too much money" and should lower prices.

According to the Wall Street Journal, the six largest U.S. energy companies with refining operations generated $24.7 billion in refining profits in the second quarter, nearly five times as much as a year earlier. The third quarter could be even stronger. Kpler’s refining earnings model estimates refinery margins will average roughly $42/bbl for the U.S. refiners, compared with about $14/bbl a year ago.

Even the refining boom that followed Russia's invasion of Ukraine did not produce margins this high. The same group of refiners averaged roughly $32/bbl in the second quarter of 2022, immediately after the war began. In Q3 2026, Kpler expects them to average roughly $42/bbl.

The 2022 shock began from a different starting point. The oil market was still recovering from Covid, which had pushed U.S. crude production down by nearly 1 million b/d in 2020. Production was recovering by early 2022, but global crude supplies were already tight.

The political response was remarkably similar. In June 2022, President Biden called on seven major refiners to increase production as gasoline prices climbed above $5/gallon and directed Energy Secretary Jennifer Granholm to convene an emergency meeting with industry executives. “At a time of war, refinery profit margins well above normal being passed directly onto American families are not acceptable,” Biden wrote. Four years later, President Trump is confronting many of the same companies over extraordinarily high refining profits and painfully high pump prices.

The similarities extend to refinery utilization. In June 2022, U.S. refiners were operating at 95.4%, close to what EIA described at the time as the upper limit refiners could consistently maintain. Today, utilization is approaching 98%. What is unusual is that this is happening while Americans are consuming less fuel: Kpler estimates U.S. transport-fuel demand fell roughly 230 kbd year on year in both Q2 and Q3, with weakness persisting into Q4.

That leaves the administration with a difficult policy problem. Since the war began, it has already pulled many of the conventional levers available to increase supply and ease logistical constraints. The administration authorized a 172 million barrel release from the Strategic Petroleum Reserve, waived the Jones Act and repeatedly waived gasoline specifications, including E15 and state “boutique” fuel requirements. President Trump invoked the Defense Production Act to support expansion of domestic petroleum production, refining and logistics capacity. Last week, the White House went further, discussing regulatory relief, expedited permitting and investment in additional refining capacity directly with industry executives.

These measures can improve distribution and encourage future capacity additions, but they offer limited near-term price relief. That leaves, in my view, only two meaningful options that could affect product prices in the near term.

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Supply Diplomacy

The first is supply diplomacy. Washington could press countries with available refining capacity—most importantly China—to increase refinery runs and product exports, putting additional gasoline, diesel and jet fuel into the global market. China has significant spare refining capacity, but how much reaches the international market is largely a policy decision because Beijing controls product exports through a quota system. There is a tradeoff. China's lower refinery runs have reduced its crude requirements and helped keep global crude prices in check. Increasing runs would require more crude imports, adding demand to an already constrained crude market even as additional Chinese exports ease the product shortage.

Alternatively, the administration could push for an agreement that reduces Ukrainian strikes on Russian refineries, allowing Russian refinery runs and product exports to recover. Unlike additional Chinese runs, this could restore product supply without creating the same incremental call on global crude imports.

Neither option would necessarily send those additional barrels directly to the United States. Instead, increasing supply elsewhere would reduce the global pull on U.S. products, allowing more U.S.-produced gasoline, diesel and jet fuel to remain in the domestic market while easing the global product shortage that is driving U.S. prices and refinery margins higher.

Export Controls

The second option would achieve the same objective much more directly: keep more U.S.-produced fuel at home through product export controls. Restricting exports would leave more gasoline, diesel and jet fuel in the domestic market and likely push Gulf Coast prices lower. But the U.S. product market is geographically fragmented. PADD 3 produces far more fuel than it consumes, while PADD 1 and PADD 5 remain dependent on supply from outside their regions. An export restriction would therefore create its largest surplus—and likely its largest price response—on the Gulf Coast.

PADD 1 could benefit, particularly while the Jones Act waiver remains in place; Gulf Coast-to-East Coast waterborne shipments reached a record 850 kbd in July. PADD 5 is harder. Gulf Coast barrels have become an important swing supply since the Strait of Hormuz closed, with PADD 3's share of PADD 5 waterborne receipts rising from 3.7% in 2025 to 28.5% in June. But those barrels generally have to transit the Panama Canal, where drought is already tightening capacity and threatening longer waits and higher transit costs.

Export controls could also eventually undermine their own objective. More product stranded on the Gulf Coast would lower prices and compress refinery margins—which, given today's extraordinary margins, is partly the point. Push them too far, however, and refiners could respond by reducing runs, eventually leaving less product in the domestic market.

There is also a broader strategic cost. Latin America is dependent on U.S. refined products, while Europe has increasingly relied on U.S. supply as Russian and Middle Eastern product flows have been disrupted. Restricting those barrels would shift more of the shortage onto U.S. trading partners and allies, tighten an already constrained global market and potentially raise the cost of imports still needed by PADD 1 and PADD 5. It would also damage the reputation the United States has built as a reliable energy supplier. Export controls may lower some U.S. prices in the near term, but they would redistribute scarcity and risk tarnishing a U.S. energy brand that took years to build.

There is no easy policy solution to today's product shortage. With U.S. refiners running near their limits, Washington is left choosing between trying to bring more supply back into the global market through diplomacy or intervening directly in U.S. product trade. Ultimately, bringing fuel prices sustainably lower requires more product supply—and that means restoring refining capacity and flows disrupted by the wars in Iran and Ukraine.

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