G7 Pledges Emergency Diesel Release

Paris — Some of the world’s biggest economies have pledged to open their emergency fuel stores to bring down the price of diesel, the fuel that runs trucks and farm machinery. On 2 October the leaders of the Group of Seven, or G7, agreed in a video meeting chaired by French President Emmanuel Macron to release 100 million barrels of crude oil and diesel through the International Energy Agency. Their statement says the release is to begin immediately and run for four months, with a “substantial” amount of diesel to reach the market within the first 20 days.

In the same statement the leaders reaffirmed a commitment not to restrict exports of energy to one another. U.S. President Donald Trump then said the United States would not ban diesel exports, ending a standoff in which he had threatened to stop American diesel from being sold abroad unless European countries released more of their own stocks.

Who decided this

The G7 is a club of seven large democracies: the United States, Britain, Canada, Japan, Germany, Italy and France, with the European Union also at the table. France holds the group’s rotating presidency this year, so Macron called and chaired the meeting. Trump took part, along with the leaders of Germany, Canada, Italy and the European Commission; Britain sent Foreign Secretary Ed Miliband and Japan sent Vice Minister for Foreign Affairs Kazuya Endo, according to the energy agency.

The International Energy Agency, based in Paris, is an organization of 32 member countries that coordinates their emergency oil stocks, the reserves of crude oil and refined fuels they keep for exactly this kind of shock. A barrel, the standard oil measure, is about 159 litres.

Why diesel is so expensive

Fuel supplies have been squeezed by the war between the United States and Iran. Iran has restricted shipping through the Strait of Hormuz, the narrow sea lane out of the Persian Gulf, in response to U.S. and Israeli attacks. Ukrainian drone strikes on Russian refineries have cut supplies further.

The agency’s executive director, Fatih Birol, told the leaders that crude oil exports from the Middle East had recovered significantly, but that shipments of refined fuels such as diesel remained “severely constrained.” Diesel is harder to make than petrol and hard to do without, because trucking and farming depend on it, so its price feeds straight into the cost of food and goods.

The strain has reached drivers. In Britain, diesel at the pump topped £2 a litre for the first time on Friday, the BBC reported. More than half of Britain’s diesel is imported, and almost a third of those imports come from the United States, which is why a U.S. export ban would have hurt.

How the deal came together

This is not the first release. In March, the agency’s members agreed to put 400 million barrels on the market, which it described as the largest coordinated release in its history. Birol said about 325 million barrels of that, more than 80 percent, had now been released.

The new statement says the 100 million barrels will be released “taking into account commitments that have already been fulfilled.” It does not say whether the new barrels come on top of the 75 million still owed from March, how much each country will provide, or how the total splits between crude and diesel. European governments discussed a French proposal for 50 million barrels of diesel and 50 million of crude, Reuters reported, citing three people familiar with the talks. That much diesel would equal about 17 percent of the European Union’s emergency stocks of diesel and similar fuels, Reuters reported, citing EU data.

Trump wrote on social media that Europe “has just agreed to release a massive amount” of diesel. Later he told reporters that a diesel export ban was “never really on the table,” adding: “We’re not going to be doing the export ban.” Macron said the coordinated action would “bring down the prices of petroleum products, particularly diesel.”

What it means for prices

Prices fell as word of the talks spread. Benchmark European diesel futures, contracts that set prices for future delivery, dropped about 5.75 percent on Friday, and U.S. diesel futures fell 3.25 percent, Reuters reported. Brent crude, the global benchmark, briefly dipped below $100 a barrel before ending the day around $102, according to the BBC. Before the war it traded around $73.

Speaking before the deal was announced, Alan Gelder of the consultancy Wood Mackenzie told Euronews that a major diesel release could cut wholesale prices by $20 to $30 a barrel, roughly 10 to 15 euro cents a litre at the pump, and that drivers could see the change within days. George Shaw of the analytics firm Kpler said it usually takes one to two weeks.

Analysts say the relief would be temporary. “Any further release only buys time,” Gelder said, because global diesel supply is still below demand. Analysts at the research firm Energy Aspects, quoted by Reuters, called the statement “a political statement rather than a specific and binding commitment,” meant largely to head off a U.S. export ban.

What happens next

The leaders said they would meet again within the energy agency “in the coming days” to discuss whether more diesel needs to be released. They also agreed to stagger refinery maintenance so plants do not shut at once, and to run refineries harder where they can. The agency has been asked to report within 20 days on how the release is working, including how countries should refill their reserves afterward. The statement puts the first “substantial” diesel release within the same 20 days.