Bank of Estonia economist: US-Russia diesel deal will have minimal impact
Peeter Luikmel, an economist at the Bank of Estonia, says the agreement between the US and Russian presidents to boost Russian diesel supplies to the world market will have little economic or political effect. Russia faces an acute fuel shortage, so any exports would come at the expense of its domestic market.
Peeter Luikmel, an economist at the Bank of Estonia (the country's central bank), has commented on the agreement between US President Donald Trump and Russian President Vladimir Putin to increase Russian diesel exports to the global market. Speaking on the programme Välisilm on Estonian public broadcaster ETV, he said the deal's economic and political impact would be minimal, because Russia is suffering from an acute fuel shortage.
Russia's fuel problems
Luikmel recalled that, because of the fuel crisis, Russia was already forced to restrict exports last summer. It first suspended deliveries and then additionally bought diesel in Asia that had been produced from oil Russia itself had sold to India.
As an export ban has been in force in Russia until now, and the country is currently switching to winter-grade diesel, supplies to the world market would have to come from the domestic market. The economist suggested that Russia would have to buy a significant part of this diesel somewhere or make serious compromises.
Small effect on US fuel prices
Luikmel believes Trump's decision on fuel imports is unlikely to ease the situation for American consumers. At best, he said, it amounts to a few cents, since diesel prices at US filling stations are currently 70–80% above normal levels.
In his view, the deal is primarily a political manoeuvre that could be followed by other steps ahead of the US midterm elections. He described a ban on US diesel exports a week before the vote as a primitive trick. Such a ban could cause a gasoline shortage in the US, because both fuels are produced simultaneously when oil is refined. As a result, the US could paradoxically end up with a diesel surplus and a gasoline shortage.
Global shortage
On the worldwide fuel shortage, Luikmel stressed that although Ukrainian armed forces' strikes on Russian refineries affect the market, developments in the Persian Gulf region and risks to maritime shipping security play a far greater role.
