.png)
.png)
The significant difficulty that Europe faces in breaking free from Moscow's energy supplies and stifling funding for its war in Ukraine is highlighted by the continent's increased imports of Russian diesel by more than a fifth in July.
According to Vortexa, a tanker tracking organization, the region brought in nearly 700,000 barrels of the fuel per day from Russia last month, up from the month before and a 22% increase from July of last year.
The increase highlights the challenges the EU will encounter in reaching its February target of reducing its imports of Russian diesel to zero, as the bloc has promised to do in response to Russia's full-scale invasion of Ukraine.
According to David Wech, chief economist at Vortexa, "We’re very far from Europe replacing Russian diesel. I wonder whether Europeans will manage to fully carry through on the announced diesel import ban."
Diesel supplies used by trucking companies, car owners, and manufacturers in Europe have been increasingly dependent on Russia in recent years. The Vortexa data reveal that more than half of the region's imports of diesel are from Russia.
It is unclear if the EU is ready to face the full force of the sanctions it intends to enact given Europe's reliance on imports from Russia, which make up roughly 15% of the continent's total consumption.
Europe's concerns about the security of the world's energy supply are evident in the EU's last-month easing of sanctions on Russian state-owned companies like Rosneft, allowing European businesses to transact with them for oil destined for third countries.
The production of fuel products from crude oil at refineries accounts for a significant portion of Europe's diesel supply, but the continent is currently experiencing a refining capacity shortage as a result of the pandemic-era fuel demand reductions due to decreased travel.
According to Wech, the "key question" moving forward is whether US refiners, which typically concentrate on producing gasoline, will be drawn in by the large margins on offer to produce more diesel for Europe.
According to S&P Global Commodity Insights, the price difference between Brent crude and diesel is $35 per barrel as opposed to $20 for gasoline.
Beijing has instructed China's refineries to concentrate on serving the domestic market despite the country's excess refining capacity to produce more diesel.
A severe global shortage of diesel that could result in fuel rationing was predicted by some of the biggest trading houses in the world in the early stages of the Ukraine war.
Diesel prices have reached all-time highs due to the competitive market. According to RAC, diesel prices in the UK at the pump, including tax, were almost at an all-time high as of July 15. They were 197.25p per litre.
Fears of a recession have lowered fuel and crude oil prices in recent weeks, but the pressure on the diesel market may increase as a result of skyrocketing gas prices in Europe, which are now 10 times higher than they were a decade ago. According to JPMorgan, because natural gas prices are so high, manufacturers and energy companies are being encouraged to switch from using coal to using diesel for power generation. This could result in an increase in global oil demand of 700,000 barrels per day over the winter.
According to the statement, "that additional oil demand for power generation could further tighten the global diesel market and could send diesel prices to all-new highs."
By fLEXI tEAM