Latin America most exposed to any US ban on diesel exports, Goldman Sachs says
USO•Latin America would be the region most exposed to a potential US diesel export ban, Goldman Sachs said, with US imports accounting for more than 50% of diesel consumption in Ecuador, Chile, Mexico and Peru. A sudden cutoff could lower regional GDP by around 1%, though inventory buffers and other global supplies could dampen the effects.
1. Regional exposure
Goldman Sachs said Latin America would be the region most exposed to any US ban on diesel exports. Imports from the United States account for more than 50% of diesel consumption in Ecuador, Chile, Mexico and Peru, the bank said.
2. Price and growth effects
A sudden cutoff of US supply could lower Latin American GDP by around 1%, Goldman Sachs estimated, while inventory buffers and increased exports from elsewhere would dampen the effects. The bank said global supply would likely adjust quickly, making higher diesel prices the main global economic impact.
3. Inflation estimates
Goldman Sachs estimated that a US diesel export ban would lower US retail diesel prices by $0.25 a gallon for each week of bans, implying a 2-3 basis point drag on headline US inflation after a month. It also estimated that each sustained 10% increase in diesel prices would raise global headline inflation by 0.1 percentage point and core inflation by 0.03 percentage point, with larger effects in Emerging Market Asia and Europe.
