G7 Countries Release Reserves as Refinery Capacities Contract Amid Global Diesel Crisis
Due to supply tightness, refinery losses, and record price increases in the global diesel market, G7 countries have decided to release 100 million barrels of crude oil and diesel into the market.
While supply tightness and the shutdown of refineries in the global diesel market have led to record price increases, G7 countries have decided to release 100 million barrels of crude oil and diesel from their strategic reserves.
Supply Tightness in the Global Diesel Market
The global diesel market, which powers heavy loads from trucks to tractors, is experiencing the most severe supply crunch in recent years. The widespread shutdown of refineries in the Middle East and Russia has constricted the capacity to convert crude oil into usable fuel.
Before the Iran war, the Middle East accounted for 19 percent of global diesel exports and Russia for 11 percent. While shipments from Gulf countries fell to a quarter of pre-war levels in August, Russia's diesel exports dropped to 20 percent of May levels.
Historical Records and Inflationary Pressure
In the US, retail diesel reached a historic peak at $6.53 per gallon, while the average price in the EU rose to $9.63 per gallon. IEA President Fatih Birol stated that diesel prices have doubled compared to before the war and will pressure inflation.
G7 Strategic Reserves Activated
G7 leaders decided to release a total of 100 million barrels of crude oil and diesel from strategic reserves into the market over four months. Because a significant amount of diesel will be released in the first 20 days, Brent crude fell 2.2 percent to $100.
However, experts emphasize that 100 million barrels correspond to only about one day of global oil demand, that this will only buy time, and that it may provide a limited drop at the pump.
Drivers and Freight Sector in Difficult Situation
On US highways, drivers are watching every dollar, and a trucker's 572-liter fill-up amounts to $944. While independent drivers cook their meals in the cab, more than a dozen small trucking companies have filed for bankruptcy in the past month.
Europe's Import Dependency
Moving away from Russian fuel and declining refinery capacity have made Europe dependent on imports. The continent imports about 1.5 million barrels of diesel per day, and because refineries operate at over 80 percent capacity, room for increased production is limited.
Alternative Sources and Prices in Turkey
China, the most important additional source in the short term, provided about 800 thousand tons of extra products per month to the global market in August and September. In Turkey, the liter price of diesel in Istanbul exceeded 100 liras for the first time on September 17 at 100.31 liras, before falling to 97.10 liras on October 1.