Should we worry about shortages due to Russian diesel embargo?


This is the second stage of the rocket: After targeting crude oil, the European embargo on Russian oil from December 5 will be extended to refined products this Sunday, February 5. They can no longer be imported by sea. There was a two-month delay when sanctions were announced in June. Objective: To consider the contracts that bind industry participants, for certain oil derivatives, with a fixed term at the end of the calendar year.

This part of the embargo, issued in response to the ongoing war in Ukraine, covers all refined products: gasoline, diesel, propane, butane, heating oil, petrochemical feedstock, and more. “However, until now France has imported in large quantities from Russia only a derivative, diesel, Slideshow Olivier Gantois, President of the French Federation of the Petroleum Industry (Ufip). For us, road transport (light vehicles, utility vehicles, heavy goods vehicles) is of primary concern. »

“The embargo on crude oil passed like a letter in the mail”

Before the conflict, France imported 30% of its diesel from Russia and 50% from Europe. So, should we worry about shortages? Absolutely not, Olivier Gantois promises: “The crude oil embargo is like a letter as refiners have time to shift imports to other regions such as North America and the Middle East. »

In his view, the same applies to the diesel import ban. “Major oil companies (Total, Shell, BP, Esso, Eni) and even Big retailers are buying more diesel from those usual suppliers with excess capacity: the Middle East, North America, and India”, he pointed out.

Guaranteed availability, barring refinery blockages

Furthermore, Olivier Appert, consultant at the Center for Energy and Climate at the French Institute for International Relations (Ifri), noted that, “France, like other members of the IEA (Ouch)At its refineries and warehouses, it must have gas oil inventories equivalent to 90 days of net imports from the previous year.. Unless we imagine, as this expert fears, “Pension Reform Opponents Block Oil Refinery”, Diesel availability seems assured.

But what about gas station prices? “Transporting diesel over longer distances increases costs, Patrice Geoffron, director of the Paris-Dauphine Center for the Geopolitics of Energy and Raw Materials. However, predicting an oil shock may be overdone because oil prices are already very high. »

Diesel € 2 per liter

In fact, the average price of diesel, which was €1.31 per liter in January 2020, is now close to €2 (€1.94 as of January 30, 2023, or 3 cents more than petrol). Fuel discounts (up to 30 cents a liter) were replaced at the beginning of the year by fuel checks for the most modest assets, and that doesn’t tell the whole story. “Even before the embargo, the market was anticipating tensions over diesel,” Watch Olivier Gantois.

Ufip president expects prices to remain high “at a high level”. Oil expert and former boss of the same group, Jean-Louis Schilansky, went further.he estimated “Diesel prices may continue to rise faster than petrol prices”. In his opinion, “could turn an increasing number of already environmentally sensitive motorists away from diesel” (1).

Implications of a possible Chinese takeover

“Development of diesel prices also depends on other factors”, explains Lionel Ragot, professor of economics at the University of Paris-Nanterre.This member of the Center for Prospective Research and International Information (Cepii) quotes “The future attitude of OPEC countries, their reluctance so far to increase production, and the evolution of the world economy”. “Slower Growth Lowers Crude Oil Prices”, he pointed out. After surpassing $120 (€110) several times in 2022, a barrel of Brent crude is now trading at $82 (€75).

“If the economy recovers, especially in China, where containment measures have been lifted, we can expect higher demand for oil and higher prices”, Advance Lionel Ragot.However, Patrice Geoffron emphasized that the situation remains “fragile”. in his eyes“We could easily see the price of barrels drop, which would pull down the price of fuel.”


Price ceilings for third-country purchases

In addition to the European embargo on crude oil and refined products from Russia, the EU has reached an agreement with its G7 allies (US, UK, Canada, Japan) and Australia to limit the purchase of a barrel of Russian oil by third countries to $60 (54.7 €) s price. For this reason, their trading companies, shipowners and especially their insurers (EU and UK companies largely dominate this market) cannot offer contracts negotiated at higher rates.

I bet no tanker would risk shipping a cargo that wasn’t properly insured. Following the same system, the European Union and the Group of Seven are also preparing to limit the price of refined oil. The European Commission has just proposed a $100 (€91) cap for diesel.

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