Europe’s Diesel Woes Just Got Even Worse

China this week announced it will suspend all fuel exports this month to keep its domestic market supplied. Also this week, President Donald Trump demanded that Germany and France release 120 million barrels of diesel from their storage or get hit with a U.S. diesel export ban. Europe is running out of options to stay well supplied with a critical fuel.

Diesel is the fuel, on which any economy runs. While it may feature less commonly in passenger cars these days, diesel is the default fuel for heavy machinery, agriculture, and freight transport. This makes import-dependent nations especially vulnerable to the kind of shock that the world is experiencing right now, and Europe is full of import-dependent nations.

According to Euronews, gasoline prices in the European Union have added some 29% since the start of the year, while diesel fuel prices have swelled by 40%. ECB officials expected diesel margins to peak this month, citing peak gasoline margins in August, after which they declined, but it does not seem like their prediction will come true as China just imposed a fuel export ban on its refiners. Chinese refiners are canceling gasoline and jet fuel shipments as well.

Meanwhile, diesel imports into Europe last month reached the lowest September total on record, Vortexa warned in a report earlier this week. The monthly imports stood at just 1 million barrels daily, which was as much as 600,000 barrels daily lower than diesel imports for September 2025. What’s more, “Diesel on the water pointed to Europe is more than 25% below last year’s levels, all points indicating that October will be another month of weak arrivals,” Vortexa analyst Mick Strauttman wrote.

Local fuel production at refineries across Europe was also lower in September because of maintenance, which was delayed for the obvious reason of ensuring supply for a tightening market. Maintenance can be delayed but it cannot be cancelled, so refinery runs across the continent last month were down 600,000 barrels daily from August. Yet the delay in maintenance has already caused some unplanned outages, Strauttman noted, and could cause more such events, interfering with Europe’s domestic fuel production.

Yet diesel prices are soaring across the world, not only in Europe. In the United States, fuel prices as a whole and diesel prices specifically have become an extremely sensitive topic ahead of the November midterm elections. The United States is the largest foreign fuel supplier to most of Europe. It is therefore hardly a wonder that President Trump told France and Germany to release diesel from their storage or have their access to American diesel cut off. There is no alternative to U.S. fuel imports, not with sanctions on Russia and Russia’s own ban on diesel exports plus China’s new fuel export suspension.

Combined, Germany and France hold about 35% of the EU’s strategic diesel reserves. The EU is estimated to hold about 39 million tons of diesel, which is equivalent to more than two months’ consumption of the bloc. This is quite a level of consumption, and the reason for this is historical.

“Decades of policy incentives, such as tax advantages, left Europe’s vehicle fleet far more diesel-heavy than regions like the US,” Bruegel analyst Georg Zachmann told Deutsche Welle earlier this week. “As a result, the EU is structurally long on gasoline, which it exports, and short on diesel, which it must import.”

In addition to the tax incentive plotline, the European Union has made an effort to curb its refining capacity as part of its plan to reduce carbon dioxide emissions. Carbon credits, taxes, and a growing emission regulation burden have prompted the closure of 30 out of 100 refineries across the bloc since 2009. This means Europe has lost a third of its refining capacity, which made it even more dependent on fuel imports than before.

The worst part of the European Union’s—and broader Europe’s—problem is that there is no quick fix. In fact, there is no slow fix, either. For starters, France and Germany will need to release diesel from storage because recent history suggests Trump can and will ban diesel exports despite advice to the contrary, to teach the Europeans a lesson, as he did with tariffs. Also, France and Germany, and all other European countries facing lower imports will need to tap storage because there is simply no alternative. In other words, dipping into diesel storage for Europe is only a matter of time.

This will, of course, create another problem, namely, the draining of said storage, but, once again, there is no alternative. Even without a diesel export ban, U.S. imports are not enough to cover for shrinking supply elsewhere in the world. With a ban, the situation will get that much worse. And it will stay bad until fuel exports from the Persian Gulf pick up. For now, tanker trackers only report on recovering crude flows, noting that fuel exports are yet to pick up.

By Irina Slav for Oilprice.com

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Source: finance.yahoo.com