Dem
52
Ties
4
GOP
44
All right, we'll continue this theme through one more item. Diesel prices hit a record high last week (not adjusting for inflation, of course). At the moment, the average is an eye-watering $6.29/gallon. That's up a little more than 30 cents over the previous week, and—yikes—it's up over $2.50/gallon as compared to a year ago ($3.77).
This is going to have some pretty unpleasant economic consequences, most of which will really start to manifest in mid-to-late October. To start, diesel powers most of America's shipping, with every 5% increase in fuel costs translating to about a 2% increase in food costs. Analysts suggest that by next month, that could work out to food bills that are 5%-6% higher. On top of that, diesel powers most of the nation's farm equipment. So, as farmers and ranchers fire up those tractors and those threshers and those reapers for harvest season, they are going to feel the pinch (and will also pass that along to consumers). Finally, diesel/diesel derivatives are used for heat in many parts of the country, particularly those that are very cold and/or very rural. Folks in the northern climes, in particular, are going to get hit in the pocketbook once the first cold snap hits.
On top of all these known knowns is a known unknown. That is, the U.S. is right in the middle of hurricane season. If there's a big one, and it disrupts supply chains even further, then that will also lead to an increase in diesel costs. At the moment, Tropical Storm Fay is threatening to become the season's first hurricane.
For all of these reasons, many senators are pleading with the White House to ban the export of diesel fuel for the foreseeable future. Particularly vocal on this point is Sen. Chuck Grassley (R-IA), who sent this via eX-Twitter over the weekend:
W[ith] diesel $6.57 in Iowa why doesn't Pres Trump put an embargo on diesel exports like presidents in the 70s put embargoes on ag products bc food prices were inflated. High diesel prices ARE KILLING FARMERS INCOME #cornwatch #soybeanwatch
This is the same Iowa that, as we have mentioned several times today, has an unexpectedly competitive U.S. Senate race. Also, on a very related note, it has three very competitive House races, all of them in districts that are R+4 or bluer.
The current administration loves, loves, loves quick fixes (see tariffs, beef). And if this quick fix had any hope of working, Trump would certainly entertain it (although maybe not, because he is kind of in the pocket of Big Oil). In any event, it won't work. There are a whole lot of potential problems, so we'll just limit ourselves to the three biggest. First, U.S. fuel supply chains are optimized for distance, and not for country of origin. In other words, telling Texas it can no longer send diesel to Mexico is all good and well, but that doesn't make it easy or economically plausible to get that diesel to Maine or Michigan or Washington.
Second, if refineries can't sell all their product, because foreign markets are verboten and American markets are too far away, they will cut production. And since diesel and regular gas are part of the same production process, that would mean less regular gas in addition to less diesel. This would cause prices of both types of fuel to rise.
Third, if the U.S. bans exports to other countries, there is every chance that other countries will respond in kind. For example, the aforementioned Maine, Michigan and Washington get much of their diesel from Canada. Do you think PM Mark Carney might just have a bit of a hair-trigger if Trump imposes a diesel embargo? We do. And so, some key northern states could end up cut off from their foreign suppliers, and too far removed from potential American suppliers. Remembering that many people need diesel/diesel derivatives to produce heat, that could very well mean people freezing to death. American citizens freezing to death is not a good look.
You can never say never with this administration, but Secretary of the Interior Doug Burgum clearly knows that a diesel embargo is not a panacea, and Trump appears to know it, too. That being the case, we humbly offer our solution to the problem: End the damn war in Iran. That may not stabilize fuel prices quickly, but it will do so more quickly and effectively than any of the other options. If there is anyone in the administration who would like to thank us for our keen insight, we can be reached at comments@electoral-vote.com. That will also work for the Nobel Committee, should any of you decide you want to recognize us with the Peace Prize. Not too likely, we realize, but probably more likely than Trump winning one. (Z)