G7 Agrees on Major Diesel and Oil Reserve Release Amid Fuel Price Surge
Global Response to Fuel Price Surge and Strategic Reserve Release
By Kate Abnett and Jarrett Renshaw
G7 Agreement and US Influence
BRUSSELS, Oct 2 (Reuters) - Group of Seven countries agreed on Friday to release 100 million barrels of diesel and crude oil from emergency reserves and pledged to refrain from energy export restrictions after pressure from US President Donald Trump.
The US led a pressure campaign on the European Union to draw down emergency diesel inventories, with the Trump administration warning that failure to act could lead to a US ban on diesel exports. Such a ban could sharply reduce supplies to Europe, which has become increasingly reliant on US diesel, and potentially inflict high economic costs on the bloc.
Trump is seeking to cool surging fuel prices ahead of the November midterm elections.
Trump’s Statements and Policy Clarification
Trump told reporters at the White House before departing for Alabama that the US would not impose a diesel export ban. He said the plan was never really on the table, even though in the past two weeks he said several times that such a ban was under consideration, and that he supported the idea.
"Europe has a lot of diesel, and they're going to be making a major world contribution, and so are we. And we're not going to be doing the export ban. We're going to be doing what we're supposed to do," Trump said.
International Energy Agency Coordination
The Iran war sparked the biggest emergency stock release ever of 400 million barrels in March, coordinated by the International Energy Agency.
"Taking into account commitments that have already been fulfilled, we will implement our commitments with a coordinated release through the IEA of 100 million barrels," the G7 said in a joint statement.
It was uncertain how much of the petroleum in the new agreement would come from what remains from the March pact. IEA Executive Director Fatih Birol said this week that members had released about two-thirds of the 400-million-barrel agreement.
Details of the Reserve Release
The release will begin immediately and last four months, with a substantial amount of diesel to be released within 20 days by G7 members and partners, the statement said.
It did not provide a breakdown of the volumes of crude, diesel and other products to be released or say which countries would participate.
"We will convene in the context of the IEA in the coming days to discuss the possibility of additional diesel releases as necessary," the statement added.
"Europe has just agreed to release a massive amount of their heavily stocked Diesel Oil. The process will begin immediately," Trump wrote in a post on Truth Social.
Political and Economic Impacts
Trump’s Approval Ratings and Political Strategy
CAREER-LOW RATINGS
Trump is seeking to bring down fuel prices as he faces a career-low 32% approval rating in a Reuters/Ipsos poll, with voters particularly concerned about the cost of living. The poll, conducted September 17-20, found that just 17% of Americans approved of Trump's handling of the cost of living.
The administration has made lowering energy prices a central focus as it seeks to ease the impact of the Iran war and high fuel costs on consumers and diesel-dependent industries such as trucking and farming.
Upcoming Executive Order
The White House is preparing an executive order to tackle record-high US diesel prices that could be unveiled as early as next week, two people familiar with the process said.
The order is expected to include measures to expand the use of tax-exempt red-dyed diesel and other tax changes to lower fuel costs, the people said. Details are still being worked out and could change.
Export Ban and Market Reactions
EXPORT BAN OFF TABLE
The G7 statement said member countries would refrain from imposing export restrictions on energy products among themselves, a move that could ease pressure on the Trump administration to impose a US diesel export ban.
"This is a political statement rather than a specific and binding commitment with the large headline number intended to persuade President Trump not to impose a diesel export ban," analysts at Energy Aspects said in a note.
Europe has boosted its imports of US diesel this year as the Iran war disrupted supply from Gulf producers.
EU and IEA Discussions
EU governments had discussed on Friday a proposal by France for European countries to release 50 million barrels of diesel, and for IEA members to release 50 million barrels of crude oil, three sources familiar with the discussions said.
A 50-million-barrel release of diesel would equate to approximately 17% of the EU's total emergency stocks of diesel and gasoil, Eurostat data showed, or about 3% of the bloc's annual consumption.
Market Response
US diesel futures fell after reports of the stock-release discussions by 3.25% to $4.49 a gallon. Benchmark European diesel futures fell by roughly $83 per metric ton, down 5.75%, LSEG data showed.
(Reporting by Kate Abnett and Jarrett Renshaw; Additional reporting by Forrest Crellin, Ahmad Ghaddar, Robert Harvey; Editing by Jason Neely, Timothy Gardner, Rod Nickel and David Gaffen)
