The move comes after the bloc found new supplies of diesel from the US, the Middle East and India to replace Russian energy supplies.
Europe has imposed a ban on Russian diesel fuel and other refined oil products, cutting energy dependence on Moscow and seeking to further cut the Kremlin’s fossil fuel income as a punishment for invading Ukraine.
Sunday’s ban comes with a hat price agreed upon by the Group of Seven (G7) – the United States, Great Britain, Germany, France, Italy, Japan and Canada.
The goal is to allow Russian diesel to continue to flow to countries like China and India, while avoiding sudden price increases that could hurt consumers around the world and reduce financial profits. support the budget and war of Moscow.
Diesel is key to the economy as it is used to power cars, freight trucks, farm equipment and factory machinery. Diesel prices rise as demand recovers later Covid-19 pandemic and limits on refining capacity, contributing to inflation in other commodities around the world.
The new sanctions create price uncertainty as the 27-nation European Union seeks new supplies of diesel from the US, the Middle East and India to replace supplies from Russia, potentially supply 10% of Europe’s total diesel demand. Those are longer journeys from Russian ports, lengthening the available tankers.
Neil Atkinson, a former analyst with the International Energy Agency, told Al Jazeera that EU sanctions on Russian products are unlikely to have a major impact on prices, at least in the early stages. .
Atkinson said this is because companies worldwide were stocking up on Russian products before the ban was heavily advertised.
“It is likely that if demand growth is very strong in Asian economies… we could see that a lack of investment in parts of the oil industry infrastructure could lead to a recession,” he said. shortages and spikes in prices”.
Price limit of G7
The G7 price cap of $100 a barrel on diesel, jet fuel and gasoline will be enforced by banning insurance and transportation services that handle diesel priced in excess of the limit. Most of those companies are located in Western countries.
It follows the level of 60 USD/barrel Russian crude oil limit went into effect in December and is supposed to work in a similar way. Both diesel and oil engine covers can be tightened afterwards.
The diesel price ceiling will not have an immediate effect as it is set at the price range where Russian diesels trade. Russia’s main problem now is finding new customers, not avoiding price ceilings. However, this cap is intended to prevent Russia’s profits from any sudden price spikes in refined oil products.
Analysts say that there could be a bull run at first as the market sorts out the changes. But they say the embargo will not cause a price hike if the ceiling works as intended and Russian diesel continues to flow to other countries.
Diesel fuel at the pump has not changed since early December, priced at 1.80 euros per liter ($7.37 per gallon) as of January 30, according to the weekly oil market report issued by the commission. EU executive committee. Pump prices in Germany, the EU’s largest economy, fell 2.6 cents to 1.83 euros per liter ($7.48 per gallon) since January 31.
The ban stipulates a 55-day extension for diesel loaded on tankers before Sunday, a step aimed at preventing market turmoil. EU officials say importers have had time to adjust since the ban was announced in June.
In December alone, Russia made more than $2 billion from diesel sales to Europe as importers appeared to have stocked up on the goods prior to the ban.
Europe banned Russia coal and most crude oilwhile Moscow has cut off most natural gas shipments.
