Diesel scarcity looms as global commodity traders warn of shortages

The world may face a global shortage of diesel due to the ongoing sanctions on Russia, which is expected to affect poorer nations from Nigeria to Sri Lanka that import its diesel.

This was disclosed by the heads of three of the largest commodity traders – Vitol, Gunvor and Trafigura, at the Financial Times Global Summit in Lausanne, Switzerland, according to Financial Times.

They warned that 3 million barrels a day would be taken off the markets due to the sanctions on Russia.

The sanctions on Russia following its invasion of Ukraine has led to diesel price increases in Nigeria due to shortages.

The Manufacturers Association of Nigeria (MAN) warned that the high cost of diesel used by manufacturers in Nigeria is expected to lead to high cost of goods and services due to the high cost of production.

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The association hinted that feedback from its members indicated that production capacity utilisation was going down due to the unsustainable cost of running daily production on diesel, citing that the price of diesel has risen above N700 due to higher crude prices, which they say will negatively affect manufacturers and their consumers.

Russell Hardy, head of Oil Trader, Vitol warned that “Europe imports about half of its diesel from Russia and about half of its diesel from the Middle East,” adding that systemic shortfall of diesel is there as Russian imports account for roughly 15% of Europe’s diesel consumption, and crude oil from Russia processed in Europe.

“The shift to more diesel consumption over petrol in Europe had created shortages of the fuel,” he stated, warning that refineries could boost their diesel output in response to higher prices at the expense of other oil-derived products to shore up supply.

Torbjorn Tornqvist, co-founder, Gunvor Group, warned, “Diesel is not just a European problem, this is a global problem.

Amrita Sen, Chief oil analyst at Energy Aspects, also warned that “diesel is by far the worst affected of the oil products because Europe imports close to 1mn barrels a day of Russian diesel and the world entered the conflict with near-record low stocks of oil.”