Russia Announces Fuel Export Ban
It’s a bad day to be the owner of diesel trucks. Rising fuel prices are coming to add insult to the injury of those bi-weekly payments.
What happened: Yesterday, Russia announced a ban on diesel and gasoline exports to all countries except those in the Eurasian Economic Union – Armenia, Belarus, Kazakhstan, and Kyrgyzstan. Though the Russian government has said the ban is temporary, no timeline has been given for when it may be lifted.
Fuel prices were already on the rise due to recent cuts by OPEC+, which includes Russia. And yet, despite being one of the world’s largest suppliers of diesel, there have been growing shortages of Russian domestic supply leading to spikes in wholesale fuel prices.
- Russia’s southern “breadbasket”, a particularly tractor-heavy region of the country, was hit hard by price spikes threatening a crisis in the country’s agriculture sector.
To recap: Russia is cutting production at the same time that it is experiencing fuel shortages.
As to why, it depends on who you ask
The Russian government’s position is that by hoarding the fuel, it can saturate its struggling local markets and drive the price at home down. Others believe the export ban looks more like an attempt by Russia to once again weaponize energy against the West.
The implications: Diesel is a critical fuel to the world’s economy for use in freight, shipping, aviation, and heating fuel. So far, Western countries have mostly been doing without Russia imports—it’s Asian countries that will have to start looking for new sources of fuels.
Zoom out: The reason behind Russia’s ban likely rests somewhere in the middle of meeting its domestic needs and exercising power over global energy markets. Either way, Asian countries will increasingly compete with the West for limited diesel supplies.