Diesel export ban: will Trump push global energy prices even higher? – The Latest

0:00Jillian Ambrose:This is The Guardian.

0:30Jillian Ambrose:that we can't do anything about. And this is something that is in the gift of one man to decide. From The Guardians today in Focus, this is The Latest with me, Lucy Hough. We've had soaring energy prices for many months now since the start of the Iran war, but diesel prices are now at record highs in the UK, in Europe, in the US. Gillian Ambrose, you're our energy correspondent. In response to this, Donald Trump is threatening a diesel export ban. Why is he considering this? Well, this is a classic Trump America first strategy in a nutshell. A diesel export ban would mean more diesel in the US.

1:11Jillian Ambrose:That would mean lower prices at the pumps for Americans. And it would mean higher prices for just about everybody else. But the timing here is really important because as we know, Trump is heading into midterm elections. Doesn't look great. And this is exactly the kind of thing that could really kind of bolster morale among voters if they could pull up at the forecourt and get a really cheap tank of gas. I think that would play to his favour. And I think that is something that he is considering now. Yeah, because this is an unpopular war, an increasingly unpopular president. so if consumers were then going to the petrol pumps or the diesel pumps in this instance and facing higher prices that could be even worse but it feels like a very short-term fix and experts are warning that this could massively backfire.

2:01Jillian Ambrose:Absolutely this is this is really the definition of a short-term fix it would lower prices quickly it would give people that little feel-good boost when they fill up their car but it would have major unintended consequences both both for the US and for the rest of the world. So we have major political leaders from countries across Europe, across the world, speaking to Trump and saying, please don't do this. They are very, very worried, aren't they? Hugely worried. But, you know, so are oil company bosses in the US because they've got huge refineries, which they are running at maximum output at the moment to feed that global market.

2:39Jillian Ambrose:If that's suddenly cut off, they will have far too much diesel to supply domestically. That means they're going to have to bring down their refinery run rates considerably. And that creates a lot of technical difficulties for them. Otherwise, you know, they'll also be selling at lower prices, which they never like to do. But there are real problems in terms of operationally how they're running their refineries, which I think they're speaking to Trump about as well. And what would be the impact on the UK and Europe? Because we would stand to be very badly hit should this ban be introduced. Yeah, the good news is that Europe has a lot of its own domestic diesel production.

3:19Jillian Ambrose:So we do make a lot of our own diesel. I think something around 70 % is produced domestically in Europe. And that's a good thing. But as we know, if you need to top up and you need to go to the global market, that then sets the price for all the diesel in the country. So if you are having to go to the US for more diesel, that pushes up your price. But if you're now having to compete for a much more limited amount of diesel in the global market with buyers in Asia, for example, that price is going to dramatically rise. So we're at record diesel prices at the moment. But analysts are saying that if the US did put in this export ban, we could see prices going a lot higher than they are today.

4:06And just explain, I mean, for anyone who doesn't drive a diesel vehicle or doesn't drive at all, like why does this matter? You know, because this could have a ripple effect onto all other parts of the economy, couldn't it?

4:18Jillian Ambrose:Exactly. It's a great question because most people are not diesel car drivers. So why is this a problem? And really, people describe diesel as the workhorse of the economy. It's unglamorous, it's not high profile, but it's doing a lot of heavy lifting. Literally, if you see those giant haulage lorries and vans, I mean, they're usually diesel-fueled. So everything that you have, that you buy, that is shipped in any of these vehicles will have the price impacted. Everything will cost more. And that feeds through to consumers in your grocery bills, if not when you're at the forecourt. So whether you drive petrol, diesel, electric, or you don't drive at all, diesel prices matter.

5:03So yes, that gives a real sense of why governments are feeling so much urgency about kind of trying to pull Trump back from the brink on this. I mean, the French government have described it as catastrophic or would be catastrophic should it be introduced. And we know that John Healy, the new chancellor, is very, very worried about this. He touched on it in his speech to Labour Party conference yesterday. And there's some talks going on between the UK and the US at the moment. Is that going to work, do you think? Because we sort of know that Trump likes to have the ire of Europe because they did not get involved in his war with Iran.

5:40Jillian Ambrose:I mean, the way I see this is this is Trump's America first policy. I don't think he's going to make a decision based on what other countries want from him. He'll be making a decision based on what works for him and what works for the US more broadly. but I mean it's so frustrating for so many people because there are just so many factors today which are influencing energy costs that we can't do anything about and this is something that is in the gift of one man to decide so they want that man to make the right decision unfortunately that man is Trump so we can't say what what his decision is going to be but I wouldn't be surprised if he does a kind of partial export ban right maybe not as you know definitive as what we are fearing.

6:27Jillian Ambrose:But even if there are quotas, and even if it's for a limited time, that could still that would still ripple through the global economy. But you'd hope that perhaps the sort of oil lobbyists and people who are telling Trump, you know, this could really damage the economy in the Oval Office in his ear, that that might have some kind of an impact. You might listen to those people. Again, we can never know. I can only speculate, but the man is a dealmaker, Right. So if he can find a deal, if there's a deal to be made and it works to his favour, then he'll make it. But he's not usually someone who wants to be seen to be kowtowing to other people's demands.

7:05So that is why I'm a little bit worried about how this is going to play out. Yeah. And he is very, very worried about how things are looking ahead of the midterms. I mean, we have a sort of myriad of issues, as you touched on at the moment, because we have continued disruption in the Strait of Hormuz, the ongoing war in the Middle East. All of these factors are playing into an increasing energy global supply crunch. I mean, we've spoken before that this crunch was likely to happen in the autumn and winter. And it feels like it's kind of starting to come to pass now, doesn't it?

7:40Jillian Ambrose:Exactly. I think, you know, we've all been looking at the oil price and the oil price is nowhere near record highs. It's over$100 a barrel, which is not good, but it's not nearly as high as people feared it would go. What we're seeing, though, is the problems we are now facing, the more pressing problems, are not a shortage of crude. It's a shortage of that refining capacity to turn the crude into the fuels that we actually use. And that is partly due to the war in the Middle East. You know, the same ships that can't get through the Strait of Hormuz carrying crude can't get out carrying diesel.

8:12Jillian Ambrose:And unlike crude, we don't have alternative pipelines to work with. So they really are stuck. But this is all happening at a time when Russia is being really badly battered by Ukrainian attacks on its energy infrastructure. So we've seen their refinery output plummet down to 20-year lows at the same time. The other factor is China. They are pulling back on how much refining they're doing because the cost of oil is very high. So it doesn't work to their favour to be refining fuels that way. So really, it's a perfect storm for the fuels industry. I wish we had a kind of whiteboard that we could do a drawing of how interlinked all these complex supply chains are.

8:56But if any one of those went, that would be immensely damaging. But if all of them are disrupted at the same time, it creates, as you say, this perfect storm.

9:06Jillian Ambrose:Exactly. And, you know, there's no easy answers to any part of this problem. So it really is something that we are going to, I don't know, have to really struggle with this winter. The oil market has been remarkably resilient, really, when you think about the level of disruption that we've seen. But in fuel, I think we found an area that is maybe a more difficult nut to crack. Well, it feels like what we need is just an end to this myriad of global conflicts. World peace, you might say. World peace would be great. An end to the current conflict would be a good place to start. Thank you so much, Gillian.

9:43Jillian Ambrose:No problem. That's it for today. My huge thanks to Gillian Ambrose, The Guardian's energy correspondent. You can keep up with all her reporting over at theguardian.com. And do listen to our sister podcast, Science Weekly. Madeleine Findlay will be looking at whether household cleaning products are damaging our health. Thanks for listening to this episode of The Latest. Today in Focus will be back in your feeds as usual tomorrow morning. The latest will be back tomorrow night. This episode was produced by May Robson and Angus Neill. The senior producer was Ryan Ramgobin. And it was presented by me, Lucy Hough.

10:18Jillian Ambrose:This is The Guardian.