“Global Diesel Prices to Rise Again,” IEA Warns

[Financial News]  

The International Energy Agency (IEA) warned on the 14th (local time) that diesel prices in Europe, Africa and Latin America could start rising again in the coming weeks. This followed its pessimistic assessment that a global diesel shortage would persist until the middle of next year. The IEA has been working to ease the imbalance between supply and demand, including by coordinating a recent international agreement among major countries to release diesel reserves.
According to the Financial Times (FT) and other foreign media outlets, the IEA was concerned that a sharp rise in charter rates made it inevitable that diesel prices would rise again across these three continents.
The IEA pointed out that last month, wholesale diesel prices in Europe and the United States surged to as much as $220 per barrel, more than doubling from their levels before the Iran war broke out on February 28, but the price increases had done little to dampen demand. Despite the steep rise in prices, it said, “because diesel is deeply intertwined with economic activity,” it is difficult to trigger a slowdown in diesel demand, as diesel acts as the blood that keeps the economy’s arteries flowing.
The average price of diesel at U.S. gas stations reached $6.28 per gallon the previous day, becoming the biggest issue in the U.S. midterm elections, which are just three weeks away.
The IEA was concerned that although refiners were likely to increase production, the diesel market would remain tight through next year. The IEA asserted that restoring supply chains in the Middle East market was key to easing the situation.
The agreement between the United States and Russia to resume Russian diesel exports was also expected to do little to stabilize actual market supply and demand. This was because Russia had lost significant refining capacity due to Ukrainian attacks on energy facilities.
According to consulting firm Energy Aspects, pessimistic forecasts also dominated this week at the World Petroleum Congress (WPC) in Riyadh, Saudi Arabia. Even if operators sought to restart refining facilities, forecasts said that “even in the best-case scenario, restarting would take six months, and in practice at least a year”; the effort was also expected to entail enormous costs.

[email protected] Song Kyung-jae Reporter