Could Luxembourg face diesel shortages?

On Tuesday, mere hours after Ukraine announced the start of a new Russian offensive in the Donbas region, French Economy and Finance Minister Bruno Le Maire warned that "stopping oil imports from Russia is more urgent than ever."

But there is a catch: While Europe is already reliant on Russia regarding crude oil imports, it is much more so when it comes to diesel. Last year, Russia supplied more than half of Europe's imports (54%), significantly outpacing the Middle East (27%).

Diesel: The sticking point

Russia, the world's top oil exporter, produces 11 million barrels of crude oil a day, with slightly over 5 million barrels going to market. However, the country also exports 1.5 million barrels of diesel fuel each day, which Europe – lacking sufficient supplies of its own – is particularly interested in.

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In Luxembourg, determining the exact share of Russian diesel imports is extremely difficult, if not impossible. Belgium, Germany, France, and the Netherlands are among the countries from which the Grand Duchy buys directly. These countries are also heavily reliant on Russian diesel.

"In 2020, France imported 25 million tonnes of diesel, a quarter of which was Russian diesel, about 6 million tonnes," said Olivier Gantois, President of Ufip (French Union of Oil Industries).

A gamble on prices

"We in Europe and France must cope with this need for diesel, which is likely to become even more critical if choices are made in the coming days or weeks," said Barbara Pompili, France's Minister of Energy Transition.

"It's critical to understand that this will be a significant problem for diesel, and that it will be far more serious than any problems we would have with oil," she said.

However, there is little reason to believe that Europe would face a genuine diesel scarcity. "I don't believe there will be any rationing of diesel," TotalEnergies CEO Patrick Pouyanné remarked on RTL a few days ago. In the event of a crisis, European countries have strategic reserves that they can call upon.

"We have a potential dependence (on Russian diesel, editor's note)," says Olivier Gantois, president of Ufip, "but the market is already in the process of reorganising itself and, in particular, of shifting away from Russian diesel, as evidenced by the significant increases in diesel prices."

Prices are the real risk in this scenario. If Europe decides to implement an embargo on Russian oil, diesel prices will rise to new highs. And this at a time when diesel prices in Luxembourg have climbed by more than 17% since the start of the Ukraine conflict. This is far larger than the increase in petrol prices (+7%).