New York [Us], October 12: A new pact that calls for Russia to boost the US supply of diesel over the next few months is unlikely to make a dent in painfully high prices at the pump or elsewhere, energy policy experts say.
President Donald Trump announced Friday that he had struck a deal with Russian President Vladimir Putin to immediately supply the US more than 300,000 tons of diesel. That would be followed by an additional 500,000 tons in November, then 4 million more tons at some point after that.
The deal marks a stark reversal of policy by the US, which from the start of Russia's war with Ukraine had banned imports of Russian oil, and comes at a time when the US economy and consumers are being squeezed by a global rise in oil prices due to the eight-month-long US war with Iran.
The price of diesel has shattered records in recent weeks, ratcheting up inflation for a broad swath of consumer goods.
The national average for a gallon of diesel in the US hit a record high of $6.53 on September 22, according to motor club AAA. It averaged nearly $6.28 a gallon on Friday, up from almost $3.68 this time last year. Diesel prices have hit records in Europe, too.
Higher diesel prices mean more expensive transportation for a long list of everyday goods. That's because diesel is used for many freight and delivery networks. And some businesses have already passed along steeper costs to consumers in the form of added fees on online orders and packages in the mail.
Shoppers may feel more and more sticker shock, particularly in the grocery aisle. Perishable foods, like meat and produce, face one of the most immediate strains of expensive diesel because they need to be hauled in and restocked frequently - or may be harvested using farm equipment powered by the fuel.
That's turned up the heat on Trump and the Republican Party to address surging prices ahead of the November 3 midterm elections. The president's approval ratings on the economy have hit a new low, according to an AP-NORC poll released last week, as the Iran war and his trade battles have increased U.S. prices for oil and other goods.
Energy policy experts on Friday expressed doubts that a boost in diesel supply from Russia will have a significant impact on oil prices, whether in the US or globally.
"It's kind of shuffling deck chairs on the Titanic," said Michael Lynch, distinguished fellow at Energy Policy Research Foundation, a nonpartisan research institution focused on energy and economics.
"If we get diesel from Russia, basically it means that their existing customers are not going to get it and they'll have to go somewhere else, and that will keep the price basically where it is now," Lynch said.
And while the White House may be counting on this move to give some relief at the pump for US truckers, ranchers and farmers who have been hit hard by rising diesel prices, that's not a given.
"The best you could hope for is a tiny dip in prices locally in places like the New York-New Jersey area, Philadelphia maybe," Lynch said. "It just means that the oil is just going to be shuffled around and it's not really going to change the price globally or across the US." If Russia, which in July moved to ban diesel exports due to Ukrainian drone strikes on its refineries, now believes it is able to resume exports of diesel, then that will help stabilize global diesel prices, said Daniel Sternoff, senior fellow at the Columbia Center on Global Energy Policy.
However, prices are likely to remain elevated overall because a lot of refining capacity in the Middle East isn't available to the world market due to the disruptions in the Strait of Hormuz from the ongoing US-Iran war.
"Refined products like diesel are still barely half of prewar levels," Sternoff said. "So, even if there were to be some follow-through from the Russians to put a little extra diesel into the world markets, it might take the edge off of prices, but it will not substantially lower them." While the deal between Trump and Putin probably won't have much of an impact on prices for diesel consumers in the U.S., it will benefit Russia, said Clayton Seigle, an energy strategist and expert at the Center for Strategic and International Studies.
That's because Russia is trying to offload its summer-grade diesel for the heavier winter and arctic grades that they will need in the coming months, Seigle noted.
"I don't think it'll be enough to materially lower prices in the United States or Europe, but it does certainly let Moscow off the hook in terms of revenue squeeze," he said.
Source: Qatar Tribune
