PETROL SHORTAGE. The consequences of the war in Ukraine are numerous. After cereals and food prices, it is the supply of diesel, already stretched with the post-Covid 19 economic recovery, which worries many experts. Europe is particularly exposed to the risk of shortages.
After the surge in fuel prices at the beginning of March and the expected surge in many food products, including cereals, the war in Ukraine could also have consequences for Europe’s supply of diesel, the fuel diesel vehicles. This is the fear of many experts who are already sounding the alarm. The United States is also targeted since the figures from the Energy Information Administration (EIA) mention stocks at their lowest since 2014 and which could soon reach the 2008 record.
The situation is even worse in Europe where diesel stocks have already reached the famous level of 2008. The reason? A surge in price and a massive drop in deliveries from Russia. According to Reuters, a million barrels would be missing each day compared to the volumes delivered at the start of the year. However, Russia represents a significant share of diesel imports on the continent: if Europe manages to produce 80% of its diesel, 20% remains imported and the first supplier is overwhelmingly Russia, up to 80%.
France very exposed with its mainly diesel car fleet
Hence the alert given by Barbara Pompili, the Minister for Ecological Transition, about a possible total boycott of Russian oil: “We have in Europe and France to deal with this need for diesel, which risks become more and more crucial if decisions are taken in the days or weeks to come, she declared on March 23 on the sidelines of European discussions on the subject. “You should know that for us it will pose a real problem for diesel and that this will go far beyond the problems with oil that we may have”, she also underlined. If the government wants to be cautious, it is mainly because of the very particular exposure of France Thanks to economic incentives for many years, France has largely “dieselized” its vehicle fleet.Today in France, 75% of the volume of road fuel consumed is diesel!
If stocks are low, Europe has several strings to its bow to reduce the risk of shortages. Playing on strategic stocks to lower prices is one of them, as well as strengthening supply via other markets, such as Saudi Arabia for example. Everything will not be done in a few days, however, because diesel benefits from different regulations depending on the market, for example on the sulfur content. It is therefore impossible today to recover diesel intended for other markets. The next few weeks thus promise to be crucial both in the diplomatic arena and on the markets. Already, refined diesel prices are skyrocketing. And this is obviously not about to stop, raising fears of a massive price hike with significant consequences for industry, road freight and also household budgets.