Earlier this week, Vitol's chief Russell Hardy warned that a diesel shortage could trigger fuel rationing in Europe. Now, those warnings are multiplying, with fuel rationing no longer looking like an abstract idea. Europe is risking a blow to its economic growth, Reuters reported on Thursday, citing experts. Diesel is what freight transport uses to deliver goods to consumers, but it is also what industrial transport uses for fuel. With Russian refiners cutting their processing rates in the wake of several waves of Western sanctions, already tight diesel supply is going to get a lot tighter.
"Governments have a very clear understanding that there is a clear link between diesel and GDP, because almost everything that goes into and out of a factory goes using diesel," the director general of Fuels Europe, part of the European Petroleum Refiners Association, told Reuters this week.
Certainly not even ahem "Europe" ahem will accept Russian Rubles for truly stupendous amounts of natural gas deemed as ahem "necessity" ahem for said Europe by Putin and I imagine many near all Russia.
I find such a circumstance still simply crazy bearish for top of the line both US crude oil and distillate fuels but also same said be true of fuel from Canada as well...let alone Mexico, Gulf of Mexico, the Caribbean, Columbia and Venezuela etc which have truly awesome amounts of both food and energy product.
Alternative producers can never be able to replace Russian energy exports now or in the foreseeable future. It isn’t Russia that is suffering. It is them who are paying the price in reduced economic growth and steep energy bills.
Things could get far much tougher for the EU economy if Russia insists on payment in rubles for its gas and other energy exports. If it refuses it could risk a disruption of gas supplies and other energy products.
If on the other hand the EU agrees to pay in rubles, this will strengthen the exchange rate of the Russian currency against other world currencies and enable Russia to circumvent the sanctions.
Dr Mamdouh G Salameh
International Oil Economist
Visiting Professor of Energy Economics at ESCP Europe Business School, London