Russia temporarily banned nearly all exports of diesel and gasoline products on Thursday, further squeezing already tight markets and sparking concern that the Kremlin is once again weaponizing its energy supplies.
The export ban, which Russia said was intended to help stabilize domestic markets, came into force immediately. Moscow did not announce an end date to the ban, sparking fear that it could move to further throttle exports, as it did with its piped gasoline exports to the European Union last summer.
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“Temporary restrictions will help saturate the fuel market, that in turn will reduce prices for consumers” in Russia, the Kremlin's press office said on its website.
The announcement caused European diesel prices to jump by 5%.
Meanwhile, prices for international benchmark Brent crude also increased to $94 per barrel, a 1% increase from the previous day of trading.
Russia has already slashed its exports of diesel fuel and gasoline by roughly 30% so far in September, to roughly 1.7 million metric tons, compared to the same period in August, Reuters reported.
In 2022, Russia exported 35 million tons of diesel and roughly 4.187 million tons of gasoline.
There’s also been a drop in production from the U.S. and China, the world’s top two diesel refiners, each producing at less capacity than they were compared to pre-pandemic levels. The U.S. has shut down or repurposed a number of its refineries since 2020, and those that are still operational produced a total of 17% less fuel this year compared to the five-year average, according to government data.
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Diesel prices had already been climbing higher on tighter supplies and sent prices soaring last year for consumers in Europe and the northeast U.S., which rely on the fuel for home heating oil.
“Despite this being only a temporary ban, the impact is significant as Russia remains a key diesel exporter to global markets,” Alan Gelder, the vice president of refining, chemicals and oil markets at consultancy Wood Mackenzie, told Bloomberg.