This is a brief live-on-air commentary just after the G7 announced that it would release 100M barrels of diesel fuel to supply markets that are tight due to the Hormuz crisis. This will go a long way to keep inflation in the US, Europe and Asian allies down, protecting consumers and economies.
While Hormuz is already, as I said, transiting as much CRUDE OIL as before the Iranian regime closed it – i.e., Tehran has lost control of the Straight to the US military, which is successfully escorting ships out even in daylight now.
Meanwhile, the amount of REFINED OIL products flowing out has not yet gotten up to pre-war levels, and so we see the present refined-fuel-market shortages and high prices.
However, I said that even once drone-and-missile-damaged Gulf states’ refineries are repaired and fully back online, the diesel (and jet fuel) crisis will not be rapidly fully resolved.
One factor is that Russia used to export almost 0.8M bbl per day, second only to the USA at about 1.3M bbl per day, but Russia has suspended all diesel exports. And, Russia will remain off the export market, due to Ukrainian drones for the foreseeable future.. However, naturally no one in the G7 wants Russia to be able to export its diesel again, at least not as long as it uses its oil and refined fuels export revenues to fund its war of aggression against Ukraine.
Of lesser impact, for an unknown duration, is that China has again ordered its refineries not to export diesel. Its exports are normally about 1/10 that of the USA, at 0.12M barrel per day. However, in a crisis every bit helps. No doubt Beijing’s order to refineries to stop diesel exports is at least partially done with a geopolitical intent to exacerbate the diesel and jet fuel problems experienced by the USA and its European and Asian allies.
Tom O’D.
