Bipartisan senators say Russian diesel deal violates 2022 import ban
Diesel futures on Monday erased all but a penny of the after-hours decline that followed President Trump’s social-media post Friday announcing a Russian diesel deal. The arrangement Trump announced — hundreds of thousands of tons of diesel flowing into global markets this month and next, with larger amounts to follow — has so far failed to convince traders of meaningful price relief.
The volumes Trump outlined work out to a little more than 100,000 barrels a day in October and roughly 125,000 barrels a day in November. That compares with about 800,000 barrels a day that Russia shipped last year, when it was the world’s second-largest diesel exporter after the United States. Analysts and traders describe the volumes as a drop in the bucket relative to the global supply deficit. Russia’s exports had already dwindled before the Kremlin banned them in July to ensure adequate domestic supply for the summer harvest; analysts say the modest quantities may also reflect Russia’s greatly diminished refining capacity.
Energy analysts and traders called the volumes inadequate. “Irrespective of whether U.S. importation of Russian diesel is legal, it may not be particularly material to U.S. price relief,” analysts with ClearView Energy Partners wrote in a note to clients. “That won’t provide significant cost relief,” said Aubrey Hilliard, president of the Carolinas division at fuel marketer Texican Natural Gas.
The legal challenge is bipartisan. Members of the Senate Foreign Relations Committee wrote that a 2022 law bars Russian energy imports until Russia ends its aggression against Ukraine and stops threatening U.S. allies in the North Atlantic Treaty Organization. “President Trump’s decision to allow Russian diesel imports to the U.S. runs directly counter to that law,” the bipartisan group wrote. “The administration must immediately reverse course.” Last month, Trump signed a bipartisan measure intended to squeeze the biggest importers of Russian oil and gas.
National average retail prices for diesel stood near $6.27 a gallon Monday, down from a record $6.53 last month but 71% higher than a year ago. Diesel powers trucks, farm implements and construction equipment, and its costs can be passed down to consumers through higher prices for groceries and other products.
Diesel prices surged this year after the start of the Iran War, which has choked off Middle Eastern fuel exports. Global supplies tightened further as Ukraine’s increasingly successful attacks on Russian refineries intensified. U.S. refineries have boosted diesel exports but are running at capacity and unable to plug more of the global shortfall. Analysts told the Journal that what would actually move prices is beyond the scope of the Russian arrangement: a Russia-Ukraine ceasefire, or restored traffic through the Strait of Hormuz.
The Russian supply deal is one of several moves the Trump administration has pursued to lower fuel prices ahead of next month’s midterm elections. Shortly after launching the war with Iran, Trump suspended the century-old Jones Act to allow foreign ships to carry fuel and other industrial commodities between U.S. ports. More recently, he unveiled an executive order temporarily permitting trucks to use dyed diesel — a tax-exempt fuel typically reserved for farming — deferring payment of the federal diesel tax of 24.4 cents a gallon through year’s end. The administration has also successfully pressured allies to tap emergency stockpiles, and Trump declined to ban U.S. diesel exports, which total about 1.5 million barrels a day.