"Pretty bad"

Price shock looms: Global market faces diesel shortage due to Putin

Russia has imposed a ban on diesel exports due to the fuel crisis in the country. This could throw the global market into turmoil.(Bild: Krone-Collage/AFP/IGOR IVANKO, AFP/YEKATERINA SHTUKINA)

Russia has pulled the emergency brake and banned diesel exports. The Kremlin hopes this will help stem the fuel crisis in the country. However, the export ban comes at a very inopportune time and could further exacerbate the existing energy crisis—including in Europe.

“Today we have banned the export of diesel,” announced Russia’s Deputy Prime Minister Alexander Novak on Wednesday. The aim is to combat the diesel shortage in the country. However, Russia’s decision has far-reaching consequences. “The rest of the world isn’t producing enough diesel to meet current demand,” warns Alan Gelder of the research and consulting firm Wood Mackenzie.

“Pretty bad”
“This could get pretty unpleasant,” the expert fears, as reported by “The Financial Times.” The global impact of the export ban is “pretty bad,” Natalia Losada of the analysis firm Energy Aspects also told the U.S. broadcaster CNN.

This is because Russia is not only halting exports, but the fuel giant may soon have to import diesel itself. Gasoline is already being purchased from abroad. This would make the situation twice as dire: Vladimir Putin’s diesel is missing from the market, and on top of that, Moscow is tapping into foreign sources.

Russians are struggling with a fuel shortage, and long lines are forming at gas stations.(Bild: EPA/SERGEI ILNITSKY)

Serious Consequences
According to the analysis firm Kpler, Russia is the world’s second-largest diesel exporter. Russia’s main customers are Turkey and Brazil. Nevertheless, we too could feel the consequences of the export ban: If Turkey and Brazil are no longer supplied by Russia, the two countries will “compete with Europe for U.S. oil and oil from the Middle East and India,” fears expert Losada. That could lead to rising prices.

:A Bad Timefor This Yet the situation is already extremely tense even without a Russian export ban: The war with Iran has flared up again, and the Strait of Hormuz remains unsafe for passage. About one-fifth of the world’s oil consumption is shipped through the strait—under normal circumstances. “Tanker traffic through the Strait of Hormuz has essentially come to a standstill,” Jorge Leon of the consulting firm Rystad Energy explained as recently as Thursday.

The first effects of this are already visible. Diesel and crude oil prices have risen following the escalation of the war in Iran and the announcement of the export ban. Traders wanted to secure supplies while they were still available. Experts believe that supply could become increasingly scarce.

Russia’s Crisis Continues to Worsen
While the rest of the world hopes to be spared the effects of the export ban, the fuel crisis in Russia itself continues to worsen. Ukraine is managing to strike at Russia’s energy infrastructure so effectively that Russia is struggling with a serious fuel shortage—and citizens in large parts of the country can no longer fill up their tanks as usual. 

Even the diesel export ban can do little to address this, believes Sergey Vakulenko of the Carnegie Endowment for International Peace think tank. “The diesel export ban seems aimed more at calming domestic concerns than at resolving the fuel shortage in Russia,” he told *The Financial Times*. Statements by Russia’s Deputy Prime Minister Novak also support this assumption. According to him, Russia could begin importing refined products from abroad as early as July.