(WASHINGTON) – US diesel prices have surged past $6 (approximately £4.70) a gallon for the first time, prompting US President Donald Trump to publicly demand that Ukraine halt its strikes on Russian oil refineries. The national average diesel price in the United States topped $6 a gallon on Friday, more than 60 percent higher than a year ago.
Trump delivered a direct public rebuke to Ukraine, saying he wanted the strikes to stop. He said Ukraine’s President Volodymyr Zelenskyy “has to do one thing” and “has to stop knocking out diesel fuel in Russia.” Trump added: “Let him go after targets, but not diesel fuel because he’s causing a shortage of diesel fuel. This isn’t done by the Middle East. This is done by what’s happening with Russia and Ukraine.” He continued: “There are plenty of other targets. Don’t hit diesel fuel because that’s hurting the world. We don’t want him to hit diesel fuel.”
Ukraine has intensified its attacks on Russian refineries over the past year, targeting a sector that supplies fuel to Russia’s economy and military and produces petroleum products for export. The strikes are a key part of Ukraine’s strategy to hit an industry that generates revenue for Moscow and supplies fuel needed by the Russian military.
However, the refinery strikes are not the only pressure on global energy markets. According to Olga Khakova of the Atlantic Council’s Global Energy Center, there are a number of global factors impacting prices. She noted that the Middle East is the primary factor, with approximately 10 percent of global seaborne diesel supplies moving through the Strait of Hormuz. The conflict with Iran has also disrupted energy supplies and pushed up oil prices.
Khakova explained that while Ukraine’s actions are having an impact, the numbers provide context. She said that at peak levels, Russian diesel exports account for only two to three percent of global diesel demand, compared with the 10 percent flowing through the Strait of Hormuz. She stated it is impossible to assign an exact number to how much of the price rise is due to each factor because the global market is so complex.
US refineries are currently operating at 95 to 97 percent of capacity and have increased diesel exports to record levels of close to two million barrels a day, up from around 1.3 million barrels. Khakova noted that the diesel market does not adjust to higher prices in the same way as petrol. She said diesel “fuels the heart of country’s economies” and demand does not go down when prices rise, meaning industries and consumers “just eat that up.”
Khakova explained why Ukraine is attacking Russian refineries in the first place. She said Ukraine has limited options in terms of defending itself, especially given slower or decreased support from the United States and other allies, particularly in areas such as Patriot missile systems. She noted that Ukraine has developed a tremendous drone industry in record time, with drones now reaching distances of up to 300 kilometres into Russia, which she described as a global record.
She said Ukraine is going after “the heart of Russia’s economic machine, the war machine” and that diesel is a particularly lucrative fuel for Russia. Every ruble generated from diesel exports goes towards destruction in Ukraine, including attacks on hospitals, maternity wards, kindergartens and schools. She cited a recent high-rise strike in Odesa in southern Ukraine.
When asked whether Ukraine stopping its strikes would change the market situation, Khakova said it is hard to predict exactly how much the market would move, but it would not solve the global diesel shortage. She said it could provide short-term relief or a very small percentage of relief. She added that asking Ukraine to stop its major defence strategy without asking Russia to make concessions would be unfair. She suggested Trump could ask for a ceasefire of at least a couple of months, or offer Ukraine sufficient Patriot missiles to get through the winter in exchange for not hitting oil and gas infrastructure.
Khakova noted that American voters care about the energy crisis regardless of political affiliation, which is why the conversation is happening ahead of the midterm elections. She said that even with such a deal, it would only have a marginal effect on global energy markets because of the ongoing constraints in the Middle East and lower diesel exports from China. She concluded that Ukraine is “just a small factor here” and that it would be unfair to say it will not make a difference, but not the kind of difference Trump is looking for ahead of the elections.
The Atlantic Council’s Global Energy Center provided the analysis. The location of the interview was Washington, District of Columbia.
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