Europe on Friday caved to President Trump’s demand that it release barrels of diesel oil from reserves – but experts are warning it could have little to no effect on US prices at the pump.
The release of up to 100 million barrels of diesel oil within the next few months could help lower the price of oil by a few dollars, since it’s a global market, experts said. It could also help reduce European diesel prices, which are near an equivalent of $8 a gallon.
But the US produces the vast majority of the diesel it consumes each year, meaning the impact would be “at most a few pennies of change,” Joe Adamski, managing director of ProcureAbility, a supply chain consultancy, told The Post.
“The government is trying to solve a supply crunch with temporary measures and dipping into reserves. That’s a temporary fix at best,” Nic Puckrin, cross-asset analyst and founder of Coin Bureau, told The Post.
Trump has previously proposed a ban on diesel exports, which would be disastrous for European nations, but the G7 agreement to release reserves took this idea off the table, according to a statement Friday. The commander-in-chief is also reportedly considering an executive order next week to lower US diesel prices.
Experts said these changes could immediately lower US gasoline prices by 30 to 40 cents – but the effects would be temporary and refiners would eventually move production elsewhere.
A more permanent solution would be an end to the war in Iran, which has effectively blockaded the Strait of Hormuz and disrupted global energy supplies for seven months.
Trump said Thursday night that Iran “is ready to fold up,” adding that he believes the US will win the war “right after the election.” But he also said US strikes against Iran might resume right after the November midterms.
“Until we get back to a point of getting the Strait of Hormuz reopened, getting the Red Sea reopened and stabilized, we’re going to continue to see disruptions,” Adamski said.
French President Emmanuel Macron announced Friday that the G7 nations – the US, France, Italy, Germany, Japan, Britain and Canada – have agreed to release 100 million barrels of diesel and crude from their stockpiles.
The International Energy Agency will coordinate the release, and none of the countries involved will “restrict the exchange of energy and petroleum products between partner countries,” the French president said.
Trump wrote in a post on Truth Social that this release includes “a massive amount” of Europe’s diesel stockpiles.
It could help ease prices in Europe, which typically gets most of its fuel from the Middle East and Russia. Along with Strait of Hormuz-related disruptions, Ukrainian attacks on Russian refineries have prompted Russia to hoard supplies, making Europe doubly reliant on the US.
The US is also clearly expecting “some impact. Because the diesel market is global, easing pressure on supply in Europe does affect the wider market,” Puckrin said – though the size of the impact could be smaller than Americans are expecting.
The total release is equivalent to just one day’s worth of global oil demand. G7 leaders have not indicated how much of the release will be allotted to each nation.
In March, the IEA coordinated a similar release of 400 million barrels of strategic reserves. The US Strategic Petroleum Reserve now stands at roughly 283 million barrels, its lowest level since the 1980s – and yet gasoline prices have still soared above $4 a gallon, and diesel above $6.
Earlier this week, the US offered to release the last 40 million barrels involved in that deal. It will have at most a 10 cent impact on gasoline, though a three to five cent decrease is more likely, Adamski said.
Trump and other Republican leaders have been eager to drive down gasoline prices ahead of the November midterm elections, especially diesel.
Prices have eased slightly from highs last week, with national average gasoline prices hitting $4.40 a gallon on Friday – down from $4.49 – and diesel at $6.37 – down from $6.50.
Diesel is still far above its average of $3.70 a gallon this time last year. The pricier, refined fuel is used in heavy trucks, meaning it has a direct impact on transportation costs.
Basically everything that consumers buy – from food and apparel to regular gasoline – is transported throughout the country on heavy trucks, meaning higher diesel costs could easily bleed through to price tags at the grocery store.
Refined fuel is also used to heat homes, so Americans could face higher heating bills than usual this winter season.
Reuters reported Friday that Trump may sign an executive order as early as next week to lower diesel prices, potentially allowing the widespread use of red-dyed diesel.
It’s the same chemically as regular diesel fuel, but dyed red to distinguish its tax-exempt status. Red-dyed diesel is meant for off-road equipment like tractors and typically banned from use on public roads.