Escalating strikes in the Russia-Ukraine war are driving fresh fuel and food price shocks alongside the Middle East conflict. Russia's diesel export ban and damaged refineries have tightened global fuel supply, while attacks on Black Sea grain terminals threaten wheat exports headed into harvest season.
Debnil Chowdhury, head of Americas and Europe refining and marketing for S&P Global Energy, says the Middle East crisis has overshadowed Russia's outages and their sizable impact on global diesel supply. Russia's ongoing war with Ukraine has intensified in recent weeks, with Russia striking Kyiv and Ukraine hitting Russian energy infrastructure with growing precision. That has been a major factor behind rising diesel and gasoline retail prices, stoking fears of inflation as it squeezes American household budgets.
Diesel exports choked off
Russia has banned diesel exports, taking offline roughly 800,000 barrels a day of fuel that mainly supplied Turkey, Brazil and some African nations. That has pushed those buyers to scramble for alternatives, leaving Europe's diesel stockpiles low and pulling the U.S. in to fill the gap. Meanwhile, Russia's refining capacity is about 40% offline.
U.S. refiners such as Marathon Petroleum and Valero Energy have benefited, with shares hitting record highs on the back of strong quarterly profits. But the rising cost of diesel, which Chowdhury calls the economy's workhorse fuel, does not hit consumers immediately. Instead, he said, it works through the economy over the next three to six months. According to Chowdhury: "It leaves us in a precarious situation."
Crude oil and wheat both surge
On Thursday, Brent crude topped $107 a barrel, and the jump dragged down stocks and bonds. WTI crude surpassed $102 a barrel the same day, with both benchmarks up nearly 80% so far this year.
Wheat futures have gained more than 46% this year, with roughly half of that increase coming in the last three months. Attacks on Black Sea grain terminals threaten wheat exports as the northern hemisphere's harvest season and winter approach, and with Middle East fertilizer still out of reach.
Fuel crisis already visible in Russia
Tatiana Mitrova, a fellow at Columbia University's Center on Global Energy Policy, said Russia's fuel prices are officially about 16% higher so far this year, with lines at fueling stations and some rationing. Ukraine's drone campaign against Russian refineries began about a year ago and has become more damaging as strikes hit facilities' most expensive and hardest-to-replace components.
Analysts at data platform Kpler estimate global oil-refinery capacity is running at around 80 million barrels a day, down from a more typical 86 million barrels a day for this time of year. Russia has tried rerouting grain exports through its Baltic Sea corridor, but that route carries only a fraction of its Black Sea volume, Mitrova said. She added that the effect on food security will become very visible next year, and already is in emerging economies.
Source: MarketWatch.com – Top Stories
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