All the consequences of the Russian diesel blockade
Russia has announced a ban on the export of diesel fuel, a key fuel for the world economy. Prices are already rising, but how long can the Russian blockade last? Here are announcements and forecasts
Russia on Thursday announced a ban on the export of gas oil (or diesel), a fuel obtained from oil refining, as crude oil prices soared towards $100 a barrel.
THE CONSEQUENCES ON DIESEL AND OIL PRICES
After Moscow's announcement, European diesel prices grew by almost 5 percent, above 1010 dollars per ton, while Brent oil (the main international reference) gained 1 percent, reaching 94 dollars per ton. barrel.
Russia is the second largest maritime diesel exporter after the United States and was the main supplier to the European Union before the invasion of Ukraine in February 2022. Moscow is also a major exporter of crude oil (not gasoline, however), of which it has recently extended production cuts in concert with Saudi Arabia .
BECAUSE RUSSIA'S OFFICIAL VERSION IS NOT CONVINCING
The Financial Times wrote that Russia appears to be planning to restrict the supply of oil and derivatives “at a time when central banks are struggling to keep inflation under control and with crude oil prices potentially poised to surpass 100%. dollars a barrel for the first time in thirteen months." As Henning Gloystein, an analyst at Eurasia Group, explained, Russia wants to demonstrate to the West "that it has not finished using [its] power on energy markets", after having repeatedly exploited it as a political weapon ( weaponization , in jargon ) its dominant position on the European gas market.
The official version, that of the Kremlin, is that the ban on diesel exports is "temporary" and aimed at containing the increase in energy prices in Russia.
The timing of the decision, however, is suspect. The refined products market is in a tight situation, and is therefore sensitive to announcements of supply limitations: the demand for petroleum products is growing but the supply is scarce, also because many refineries have started maintenance work during the summer.
Furthermore, the official Russian justification is not convincing because – according to the International Energy Agency – the country's refineries produce approximately double the diesel needed to satisfy domestic demand and usually export half of their annual production.
WHAT IS DIESEL FOR (NOT JUST CAR FUEL)
Gas oil, or diesel, is not only used as a fuel for cars but also for trains, planes, ships and agricultural machinery, as well as as a fuel for heating homes (this is the case in Germany), for generating of electricity and to power manufacturing industries. In short, a large portion of the world economy depends on diesel.
Since February, the European Union and the United States have banned imports of refined petroleum products from Russia, forcing the country to redirect sales to Turkey, North Africa and Latin America ( no India this time, a large buyer of Russian crude but equipped of a vast refining industry ).
HOW LONG WILL IT LAST?
Bloomberg wrote that the impact of the Russian export ban will depend on its duration. It is true that some Russian refineries are closed for maintenance, but those that are active will not be able to fully rely on the domestic market for sales. The diesel surplus may be partly stored, but at a certain point the Kremlin will have to order the resumption of exports or, alternatively, it will have to cut refinery production: the latter option is risky because it could have a negative impact on internal availability of petrol.
It is possible, therefore, that the ban will be short-lived.
This is a machine translation from Italian language of a post published on Start Magazine at the URL https://www.startmag.it/energia/russia-gasolio-divieto-esportazione-effetti/ on Sun, 24 Sep 2023 05:14:02 +0000.