U.S. Diesel Export Ban Predicted to Boost Inflation

Goldman Sachs has released a note warning investors that a U.S. ban on diesel exports could have limited direct effects on global growth, but would ultimately prove inflationary for U.S. consumers.

The bank's commodities team estimates that a ban would lower U.S. retail diesel prices by 25 cents a gallon for each week it is in place, which translates to a modest 2 to 3 basis point drag on headline U.S. inflation after a month.

However, the analysts predict that this small decline in inflation would likely reverse and turn into an increase of around 0.3/gallon once diesel storage capacity is exhausted.

The team estimates that each sustained 10% rise in diesel prices adds 0.1 percentage point to global headline inflation and 0.03 points to core, with larger effects in emerging Asia and Europe.