UK and EU negotiate coordinated release of strategic diesel reserves

Britain is in talks with EU partners to release additional strategic fuel reserves, including diesel, if needed, the BBC understands. The negotiations follow President Donald Trump's threat to ban diesel exports from the United States in a bid to reduce record pump prices for American drivers.

The timing is acute. UK diesel prices hit record highs this week and are hovering just under 200p per litre, according to motoring organisation the RAC. The latest RAC figures show average pump prices at 199.79p per litre, up from 142.38p.

The US exports between 1.2 and 1.5 million barrels of diesel per day, making it a vital supplier to world markets. Experts warn that a ban on shipments abroad could put further pressure on prices in other countries.

"We're thinking about it very seriously," Trump said of an export ban at the weekend.

Energy Minister Martin McCluskey joined a call with European counterparts on Thursday to discuss the potential ban. A source familiar with the discussions told the BBC it was prudent to prepare a co-ordinated response with other countries, including those across the EU, but added that European reserves remain from a coordinated release of strategic fuel stocks earlier in the year.

"We have a diverse and resilient supply. We continue to engage with our international partners and the UK fuel industry," a government spokesperson said. The government has stressed that there is no cause for concern about potential diesel shortages, though it expects prices to rise further.

A European Commission spokesperson said there were "lots of calls, lots of meetings" taking place on the diesel situation, including with "high level contacts" in the US administration. The governing board of the International Energy Agency meets tomorrow.

How the market got here

Global petrol and diesel prices have skyrocketed since the outbreak of the US-Israel war in Iran in February. The closure of the Strait of Hormuz, which typically transports around a fifth of the world's oil and gas, has pushed up the price of refined products.

An export ban from Russia, also a major diesel supplier, has added to the pressure.

Trump has argued that keeping surplus diesel barrels in the US would lower domestic pump prices, offering immediate relief to drivers, truckers and businesses ahead of the midterm elections. But David Fyfe, chief economist at Argus Media, said cutting off American supply would likely cause international prices to skyrocket.

Why the UK is exposed

Diesel is harder to refine than gasoline. Because haulage and agriculture depend on it, demand is very difficult to reduce.

The UK is heavily reliant on imports. Its four refineries make more than enough petrol to meet domestic demand, but not enough diesel to cover the country's needs.

The vehicle fleet compounds the problem. There were 15.1 million diesel vehicles on UK roads at the end of June, according to the Department for Transport, down from 15.7 million a year earlier. Of those, 9.8 million were diesel cars, down from 10.4 million year on year. The declining diesel fleet offers little near-term relief while commercial transport still runs on the fuel.

With the IEA governing board convening tomorrow and European officials already drawing down remaining reserves from the earlier coordinated release, the next decisions on stockpile releases — and on Washington's export policy — will set the direction for pump prices across Europe.