October 7, 2026: Late last week, the Group of Seven (G7) countries agreed to release 100 million barrels of crude oil and petroleum products from emergency reserves, including substantial volumes of diesel, amid apparent pressure from US President Donald Trump. 

With diesel prices at US pumps reaching record levels, the American president had been pressuring Europe to release their diesel stockpiles, and even warned that the US could ban diesel exports amid global supply tightness and soaring prices of the fuel.

Following the G7 announcement, Trump — who wants to lower diesel prices ahead of the midterm polls in the US in November — announced that the US won’t ban its diesel exports. Interestingly, Trump said that a diesel export ban was never really on the table, although he himself had publicly stated over the past few days that it was under consideration and that he was inclined towards it.

US and European diesel prices had surged in recent weeks amid the highly constrained fuel movement through the Strait of Hormuz as well as attacks on Russia’s oil and gas infrastructure. Diesel supplies are tight, inventories are low and importers are scrambling to secure the fuel from geographies not impacted by conflict or chokepoint closures. 

While these steps won’t do much to deal with the structural problems that the diesel market is grappling with, they are expected to put some downward pressure on international diesel prices, at least in the short-term, according to industry experts. Diesel prices have already drifted downwards following the announcement. The extent and duration of relief will largely depend on whether global diesel flows from West Asia and Russia improve hereon.

For India, these developments are broadly positive, as a lower international diesel price would help consumers, particularly bulk and industrial buyers who are supposed to pay prices in line with global rates, even as retail consumers continue to get diesel much below international prices as public sector fuel retailers are absorbing the hit for this segment. 

Any cool-off in diesel prices will also reduce these companies’ heavy under-recoveries on retail fuel sales. If bulk diesel rates decline, it would be a positive for the Indian economy as inflationary pressure would be eased to some extent.

But on the flip side, higher international supply could squeeze the supernormal margins of standalone Indian refiners — who don’t have much exposure to retail fuel sales — as well as large diesel exporters, which are predominantly private sector refiners like Reliance Industries and Nayara Energy.

G7 decision focused on shoring up diesel supply

The G7 last week agreed to coordinate, through the International Energy Agency (IEA), the release of 100 million barrels of crude oil and petroleum products over four months, including “front-loaded substantial diesel release” in the first 20 days. The countries also agreed to examine additional diesel releases if required by market conditions.

The grouping also said that it will avoid energy export restrictions among its members, while also calling on other producers to avoid export bans. Going beyond just the emergency stocks, the group has also agreed to coordinate refinery maintenance schedules so that several refineries don’t shut down for maintenance simultaneously, and also called for higher refinery utilisation wherever possible, particularly to boost production of diesel, the workhorse of the global economy.

The G7 wants a substantial quantity of diesel to reach the market within days, instead of being spread-out over the four-month period, which shows that the tightness in diesel flows is among the most immediate pressure points in the global energy market. But there is a limit to what reserve releases can accomplish on their own, as strategic stocks are not endless. Releasing strategic stocks of diesel is primarily a bridge to get through a period of unusually tight physical supply, rather than a solution to the underlying disruption in refinery operations, and shipping.

Europe has become increasingly dependent on diesel imports from beyond the region over the past few years as it moved away from Russian fuel amid the war in Ukraine. The West Asia war has further exacerbated the supply situation for Europe, which now depends heavily on American diesel. With the decision to release emergency diesel stockpiles, the G7 is putting additional supplies in the market, while also neutralising the threat of a US diesel export ban. 

Trump’s diesel export ban threat

Amid surging cracks or margins on diesel globally, US diesel prices jumped sharply in recent weeks, reaching record levels of about $6.5 per gallon and bringing the pain of faraway wars to the American consumer. The timing is significant as the US is set to go into mid-term polls come November, and the Trump administration is evidently feeling the pressured

Diesel is politically sensitive in the US as it is not just a transportation fuel, bit also powers long-haul trucks, agricultural machinery, construction equipment, and other heavy industrial equipment. This means that a jump in diesel prices can quickly feed into consumer-level inflation. According to experts, Trump’s threat appeared driven largely by the political problem created by high pump prices in the US, and was enough to set off a good measure of panic and debate in the market. 

The US is one of the largest diesel exporters globally, and with diesel exports from West Asia and Russia hit due to the conflicts there, American diesel exports have surged further over the past six-seven months. In August, US diesel exports averaged at record levels of about 1.6 million barrels per day (bpd), up from around 1 million bpd in February, before the West Asia war began.

But the simplistic assumption that restricting diesel exports would shore up supply all over the US and in turn lower prices there doesn’t really hold water. That is because there are regional disparities within the US when it comes to fuel production and supply, and the fact that US pump prices are linked to international prices.

A gasoline station in Colorado, US. (AP)

According to industry participants, analysts, and experts, a ban or major restriction of US diesel exports would have affected countries that are regular importers of American diesel, leading to a further spurt in international prices of the fuel. 

The adverse impact wouldn’t have just been beyond American shores though. Experts point out that any significant export curb was bound to lead to a reduction in refinery production rates in the US, which would hit the US’s production of other fuels like petrol as well, ultimately leading to even higher fuel prices there. To that extent, any such move could have easily become counter-productive and self-defeating, and numerous petroleum industry chambers in the US had warned Washington about these risks.


“The US isn’t one unified fuel market. Roughly 54% of the nation’s refining capacity is concentrated along the Gulf Coast, where refineries produce more fuel than consumers in that region use. The West Coast produces enough diesel to meet its own demand but still imports gasoline (petrol) and jet fuel. The East Coast, by contrast, lacks sufficient refining capacity and relies in part on diesel supplied from elsewhere — including imports, which account for about 10% of its diesel supply,” trade group American Petroleum Institute (API) had earlier said.

According to the API, which believed that a diesel export ban would “break havoc at home and abroad”, if US diesel exports were blocked, surplus fuel could start filling storage on the Gulf Coast, and the only way to avoid producing even more surplus diesel would be to process less crude oil. “But cutting refinery runs would not reduce diesel production alone. It would also mean producing less gasoline, jet fuel and other products at a time when global fuel supplies are already tight,” it had said.

“Exports allow US refineries to balance their systems and maximize production. An export ban would require refineries to throttle utilization to reduce diesel production to equal domestic demand. Falling utilization would result in less gasoline and jet fuel production and higher prices for those products as well. Meanwhile, areas of the US that import fuel (primarily the Northeast) would face higher prices for all fuels that would now be in even shorter supply globally. This could not come at a worse time for consumers as home heating oil season is about to begin,” dozens of American petroleum chambers wrote in a joint representation to Trump a couple of weeks back.

(Source: The Indian Express)