Why is EU coordination on the agenda?

The option of using strategic fuel reserves has come onto the UK government’s table amid fresh risks in the diesel market. London is assessing whether it could take a coordinated step with European Union countries if a possible US export restriction tightens global supply.

Energy Minister Martin McCluskey discussed the potential impact of a diesel export ban in talks with European counterparts on Thursday. A source close to the matter said European reserves remain from the coordinated stock release earlier this year, but added that a joint preparedness move would be a prudent approach.

The UK government says there is no current concern about a diesel shortage, but it acknowledges that price pressure could intensify. A European Commission spokesperson also said there have been numerous contacts and meetings on the diesel outlook, including high-level talks with the US administration.

Why could a US decision affect global prices?

The US is one of the key suppliers in the global market, exporting between 1.2 million and 1.5 million barrels of diesel a day. President Donald Trump said over the weekend that the administration was seriously considering an export ban, with the aim of lowering pump prices at home.

But analysts say such a move could sharply lift international prices by tightening supply outside the US. David Fyfe, chief economist at Argus Media, said cutting off American supply would likely trigger a jump in global diesel prices.

US-related risks are not the only factor behind the pressure on prices. Energy markets surged after the war between the US and Israel and Iran began in February, while the closure of the Strait of Hormuz, through which about a fifth of the world’s oil and gas is shipped, raised the cost of refined products. Russia’s diesel export ban is also seen as one of the factors deepening the squeeze in the market.

What indicators is the UK market watching?

According to RAC, the average diesel pump price in the UK hit a record high of 199.79 pence this week. That marks a sharp increase from the previous level of 142.38 pence.

The main factor making the country more vulnerable is its dependence on imports. While the UK’s four refineries can produce enough petrol to meet demand, diesel output is not sufficient to cover domestic needs. On top of that, diesel’s widespread use in transport and agriculture makes it difficult to reduce demand quickly.

What does the demand picture look like?

  • According to Department for Transport data, there were 15.1 million diesel vehicles on the road at the end of June, down from 15.7 million a year earlier.
  • The number of diesel cars was recorded at 9.8 million in the same period, compared with 10.4 million a year earlier.

This picture shows that even as the vehicle fleet gradually shrinks, diesel remains a critical fuel for the UK economy, and any external supply shock could quickly feed through to prices.