Updated: White House Looking To Europe To Release Diesel From Strategic Reserves

President Donald Trump appears set on banning diesel exports. His cabinet, oil industry executives and some GOP lawmakers are hoping he doesn't.

Instead, they are pitching the administration several other ideas, that would be less disruptive to oil markets while still lowering the price of diesel — at least temporarily.

Among the ideas being floated is to ask European governments to release diesel from their own strategic reserves, said two people familiar with the discussions who were granted anonymity to discuss conversations with the White House.

"The motivation is to stop a ban,” said one oil industry executive familiar with the conversations.

The average price of diesel was $6.44 on Tuesday, according to AAA, $2.75 higher than it was a year ago. The high price is hurting farmers during harvest season, angering a key GOP constituency with the mid-term elections just over a month away.

The White House referred questions to the Energy Department, which announced Tuesday afternoon it was soliciting proposals for the remainder of its planned 172 million-barrel release from the U.S. Strategic Petroleum Reserve.

Energy Secretary Chris Wright said in a statement that the SPR move shows the U.S. “continues to lead the coordinated efforts to stabilize oil markets for the benefit of Americans and people around the world.”

“While the United States and Japan are delivering on their commitments, several European member countries have released only a fraction of the crude oil and petroleum products they pledged,” Wright said. “We urge every member country to fulfill its commitments.”

Interior Secretary Doug Burgum also separately suggested Tuesday morning that the administration is eyeing Europe’s stockpiles.

“The administration is discussing a lot of options and I don't want to get ahead of anybody, but it is a fact that the Europeans have a lot of diesel reserves,” Burgum said in a brief interview with POLITICO.

Europe reportedly holds the world's largest combined commercial and government diesel reserves, with more than 350 million barrels of the fuel held in various countries, said Paul Hickin, chief economist and editor-in-chief at Petroleum Economist, a London-based journal.

A diesel release from reserves “could shave the winter risk premium and ease the pull on US barrels, so it may well help Washington avoid a ban,” Hickin said. “But it would buy a few months, not solve anything. It also asks Europe to spend its insurance to fix a US political problem, at a moment when its own commercial stocks are near multi-year lows.“

A spokesperson for the German Ministry for Economic Affairs and Energy said the government there would be unlikely to agree to releasing diesel from its reserves short of physical scarcity.

“We do not speculate about future events,” the spokesperson said. “What is clear is that releases will only occur in the event of potential shortages. The release ... is not intended to stabilize prices; that would lead to speculation in the market. No further releases are currently planned.”

The administration is also asking European Union member states if they could help coordinate releases from diesel stockpiles held by private companies, said one government official familiar with the conversations.

The White House has been considering other ideas that staff could present to Trump, including allowing more use of tax-exempt dyed diesel and directing states to reduce or cut their diesel taxes, people familiar with the talks told POLITICO last week. Alabama, Louisiana and other Southern states have said they would make dyed diesel more widely available.

Diesel and gasoline prices have dropped slightly this week, easing some immediate pressure to act.

Some GOP lawmakers have criticized the idea of cutting taxes on diesel, which help to pay for road repairs.

“Yeah, you can do that, but you’re going to be leaving a deficit,” Sen. Alan Armstrong (R-Okla.) said in an interview on whether states should temporarily suspend excise taxes on fuel. “It’s not like we’ve got a bunch of states that are overfunded right now … You’re playing games with that and I think the real answer is to get our permitting reform bill done.”

Joana Lehner, Pavan Acharya and Scott Waldman contributed to this report.