Fears are growing that Europe could run out of diesel in the wake of Russia’s invasion of Ukraine — and no wonder considering the continent has historically sourced about 20 percent of its imports from the country.
European oil companies shun oil shipments from Russia as fighting enters a second month, instead seeking supplies from the Middle East, Asia and the US. Oil companies such as Shell Plc, BP Plc and TotalEnergies SE are already restricting deliveries of the fuel in Germany.
Alarmed by the prospect, traders are paying huge premiums to snag available supplies now rather than wait. Firms like Trafigura Group have warned some sites could dry up. That reflects dire predictions by Moscow politicians that Europe faces bottlenecks. There is even talk of a real ban on buying.
To get a sense of just how acute the problem really is and how quickly inventory could run out, here are some underlying numbers.
According to the International Energy Agency, 247.4 million barrels of middle distillates – the fuel category that counts diesel as by far its largest component – were stored in European countries at the end of January. That’s enough to meet about 40 days’ needs, even if the region doesn’t produce or import a single additional barrel of the fuel.
European countries will continue to produce diesel and import it from their traditional non-Russian sources. The speed at which stocks are depleted depends on their success in replacing supplies currently coming in from Russia.
However, these stockpiles are not evenly distributed, and stresses will appear earlier in some places than others. While Finland and Denmark keep enough stocks in private and state-controlled stocks to keep the industry going for more than six months, the UK and Norway keep enough for just over 30 days.
Before the pandemic, the UK relied on imports to meet about half of its middle distillate needs, with about a third of those supplies coming from Russia, according to Eurostat data. The country will have to find alternative sources for about 100,000 barrels a day of diesel, a medium-sized ocean-going tanker a week, if it doesn’t want to eat up its stockpiles.
But the UK might be in a relatively favorable position in other respects. It has traditionally relied on imports from a variety of suppliers for both crude oil and diesel.
Countries, or even regions within countries, that have traditionally relied on non-Russian supplies – either crude oil for their refineries or diesel fuel – will fare better than those with strong ties to Moscow. Europe’s largest diesel consumer, Germany, is a good example of this.
The southern part of the country is connected to the Mediterranean Sea by crude oil pipelines from Marseille in France and Trieste in Italy, which feed the refineries in Karlsruhe, Vohburg-Ingolstadt and Burghausen. As such, it is relatively independent of Russian supplies.
Likewise, the west of the country is connected to the ports of Rotterdam and Wilhelmshaven, giving it some protection from the impact of any sanctions and the “self-sanctions” that have emerged in recent weeks. However, a dependency on imported Russian diesel still leaves it vulnerable.
But it is the eastern part of the country, where refineries process mostly Russian crude, that would face the most pressure if the flow of that oil stopped.
According to the Association of German Petroleum Stockpiling, the German emergency stocks are distributed across Germany in such a way that five defined supply areas each have immediately available stocks for at least 15 days. The five regions “essentially correspond to the logistical environment of the refinery centers,” according to the association in its most recent annual report.
These stocks would be depleted much faster in eastern Germany than in the south, and the region’s ability to cope will depend heavily on how easy it is to move supplies across the country.
It will be similar elsewhere on the continent. A heavy reliance on Russian crude will make refiners in the Czech Republic, Poland, Slovakia and Hungary relatively vulnerable to supply disruptions or purchase restrictions. That could quickly affect the diesel supply.
There are already delivery bottlenecks in wholesale in some parts of Germany. More will follow if products cannot be taken to where they are needed. As far as possible, such a movement will depend on trucks, trains and barges.
Prices could also do much of the work well before material shortages hit and rise to levels that destroy demand.
But any significant shortage of fuel at filling stations would not only be a blow to motorists, but also economically devastating for the logistics, construction and agriculture sectors, which are heavily dependent on diesel.
https://www.independent.ie/business/farming/agri-business/agri-food/europes-large-diesel-stockpiles-could-run-down-fast-as-russia-bites-41485774.html Europe’s large stocks of diesel could quickly run out if Russia bites