US supplies half of Europe’s diesel imports as prices climb
The European Commission said on Thursday it had responded with “concern” to reports that Trump could prevent US diesel from reaching the global market. Spokesperson Olof Gill said “any disruption would risk negatively impacting both sides,” and the EU expected “close partners to consult each other before taking measures that affect shared markets.”
The Commission’s intervention came as Trump publicly backed the idea of an export halt. “I’ve said let’s not send out the diesel. We make a lot of diesel … I’ve called for it. I’ve called for it within my people,” Trump said.
Trump’s push, as reported, is aimed at delivering a temporary respite from high pump prices before the midterm elections. US diesel has reached a record average of $6.52 (£4.93) per gallon.
Separately, US Energy Secretary Chris Wright described a ban as a “blunt tool” that could harm US fuel supplies in the long term.
The exposure cuts in both directions. US diesel exports made up a third of Europe’s imports this year, and by August the US supplied about half of Europe’s diesel imports, according to market data. The shift reflects the loss of supply from war-damaged refineries in the Middle East and Russia.
“A US export ban would be devastating for diesel supply in Europe, which would struggle to replace supply,” said Josh Michalowski, the head of European diesel pricing at Argus Media, a commodities data provider.
“There’s enough European diesel production to ensure that we wouldn’t run out, but losing US cargoes would mean buyers would have to compete with buyers in Asia for the few available cargoes from the Middle East and India, in what is already a very competitive global market,” Benedict George, head of European products at Argus Media, said.
Europe produces about 70% of its diesel domestically and stores fuel in reserve, so immediate shortages are unlikely. The premium for diesel over crude oil — known as the “crack spread” — already hit a record high earlier this month and could climb further, analysts said. Pump prices have reached record highs in Germany and the Netherlands.
The United Kingdom is more exposed than the rest of the continent. “A US ban on diesel exports would pose a significant challenge for the UK, given the country’s growing reliance on American refined fuel,” Thomas Pugh, chief economist at RSM UK, said. With only four operating oil refineries after the closures of Grangemouth and Lindsey last year, Pugh warned that losing almost 90,000 barrels a day of US distillate — equal to 18% of UK consumption — would leave the country more exposed to global prices, with shortages becoming a “real possibility” if a ban were extended.
UK pump prices have already climbed sharply. The RAC said the average cost of diesel reached 197.75p per litre on Thursday, up from 142.38p before the start of the Iran war. In parts of Scotland, diesel at the BP Kinross Services in Perthshire reached £2.17 per litre.
Diesel remains the “lifeblood” of the UK’s agricultural and logistics sectors, fueling heavy machinery, lorries and vans, even as the share of motorists driving diesel passenger vehicles has fallen. The market for diesel cargoes “has remained relatively quiet since reports of a potential US diesel ban emerged this week,” Argus Media said, with traders still weighing how far the White House might go. “If this prospect became even relatively serious [in the White House], it would be very serious for European markets. There would be some degree of panic given how reliant buyers have become on US cargoes,” George said.
The European Commission said “high-level contacts between the European Union and the US administration are ongoing.” The UK government was contacted for comment but had not responded at publication time.