US Diesel Export Ban Could Send UK Prices Soaring, Experts Warn

Motorists in Britain are facing the prospect of diesel prices reaching £3 a litre, a substantial increase from current levels, if former President Donald Trump imposes a ban on US diesel exports, according to industry experts. The average price for a litre of diesel in the UK is currently hovering around 197.75 pence, nearing the all-time high of 199.09 pence recorded in June 2022. Some forecourts are already charging above this record figure. Filling a 55-litre family car with diesel now costs approximately £30 more than at the start of the US-Iran conflict in February, reaching £108.76.

Reports suggest that Trump is considering a 90-day ban on US diesel exports, a move that could have significant repercussions for international fuel markets. While the White House has dismissed these reports as "fake news," the price of European diesel saw a 7% increase following the initial reporting. The average diesel cost across the European Union has reached a record €2.23 (£1.92) per litre.

Ashley Kelty, a research analyst at Panmure Liberum, warned that a US export ban could lead to diesel prices in the UK exceeding £2.50 per litre. He noted that with midterm elections approaching, Trump might seek measures to lower domestic fuel prices. However, Kelty cautioned that such a policy could exacerbate economic weaknesses and negatively impact global markets. He highlighted the UK's particularly vulnerable position due to its small domestic inventories and reliance on imports, with approximately 60% of UK road fuel being diesel. A tightening of the market in North-West Europe would likely result in immediate price increases at UK pumps.

Adam Bell, a former energy department official and consultant, stated that a US export ban would remove a significant source of diesel from the global market. He predicted that while this might not cause physical shortages in Europe, it would substantially increase prices as European nations compete with Latin American and Asian customers for available cargoes. Bell also suggested that such a ban might not lead to significant price reductions within the US, as producers could use the opportunity to conduct deferred maintenance, thereby reducing capacity.

Bell added that predicting precise price increases, such as reaching £3 per litre, remains uncertain due to potential government interventions like releasing strategic reserves and unpredictable shifts in consumer demand. However, he affirmed that an increase in prices is almost certain.

A £3 per litre price point would mean filling a 55-litre family car tank would cost approximately £165.

Simon Williams, RAC head of policy, expressed concern over the steady rise in diesel prices and the continuing global supply concerns. He indicated that the focus has shifted from whether prices will exceed the previous record to how much they will climb above the £2 per litre mark. He suggested that only a significant and sustained drop in global oil costs could avert this, a scenario he deemed unlikely.

In response to rising costs, Chancellor John Healey is facing pressure to implement measures in the upcoming budget. Liberal Democrat leader Sir Ed Davey has called for a 10p per litre cut in fuel duty until Christmas, suggesting the revenue could be offset by increased taxes on oil and gas profits.