Energy prices in France will grow by 15% early next year, French President Emmanuel Macron has warned as European governments continue to search for ways to curb high inflation.
“There will be a 15% increase in electricity and gas prices in the first months of 2023,” Macron said during an interview on TV channel France 2 on Wednesday, adding that, thanks to government measures, larger hikes have been avoided.
“When there should have been a 100% increase in electricity and gas prices, it will be 15%,” the President said.
The president promised to continue providing targeted aid to vulnerable groups, such as students, and spoke in favor of adjusting wages while high inflation remains in place. He also promised “tens of millions of euros” worth of assistance to businesses.
Similar to many other European countries, France has been grappling with soaring energy prices and a cost-of-living crisis.
French Prime Minister Elisabeth Borne unveiled a plan last month to mitigate the impact of inflation, including the so-called ‘exceptional energy vouchers’ worth €100 ($100.4) and €200 ($201), which will be given to 12 million households by the end of the year.
Inflation in the Eurozone reached 9.9% last month, up from 9.1% in August, according to Eurostat.
U.S. Faces Diesel Shortage
US diesel shortages are spreading along the East Coast amid a ban on imports from Russia, raising fears of further surges in prices for the fuel as consumers brace for the winter heating season.
Mansfield Energy, one of the nation’s major fuel distributors, instituted emergency measures on Tuesday and warned its customers that carriers were being forced to visit multiple terminals in some cases to find supplies, delaying deliveries. With shortages spreading from the Northeast to the Southeast, the company advised customers to give 72-hour notice for their orders to avoid having to pay above-market prices.
“in many areas, actual fuel prices are currently 30-80 cents higher than the posted market average because supply is tight,” said Mansfield, which delivers over three billion gallons of oil products annually. With the relatively low-cost suppliers running out of diesel, distributors are forced to draw from higher-cost sources, resulting in unusually wide spreads in pricing.
Mansfield’s advisory came just six days after U.S. National Economic Council director Brian Deese told Bloomberg News that diesel supplies were “unacceptably low” and that U.S. President Joe Biden’s administration had “all options” on the table to reduce prices. However, as Bloomberg and other media outlets have noted, it’s not clear how those options would provide long-term relief.
Diesel supplies in New England, the U.S. region most reliant on distillate fuels for heating, have reportedly dwindled to about one-third of normal levels for this time of year. Nationwide, the US has only 25 days’ worth of diesel supplies, the lowest level since 2008.
Deese told Bloomberg that the US could tap its Northeast Home Heating Oil Reserve, which holds one million barrels of diesel for emergency use. But, as the Washington Post noted, demand for the fuel is so high in the Northeast that those reserves would be depleted in fewer than six hours. The White House has also considered banning or restricting exports of refined fuels – a strategy that industry trade groups claimed would backfire.
“Banning or limiting the export of refined products would likely decrease inventory levels, reduce domestic refining capacity, put upward pressure on consumer fuel prices, and alienate US allies during a time of war,” the American Petroleum Institute and the American Fuel and Petrochemical Manufacturers said earlier this month in a letter to U.S. Secretary of Energy Jennifer Granholm.
The shortages also put the U.S. at risk of further spikes in prices if there is a supply disruption, such as a refinery breakdown. Higher prices for the fuel would ripple through the US economy because 18-wheelers and other diesel-powered vehicles carry about 70% of the nation’s freight tonnage.
Diesel prices are currently averaging nearly $5.32 per gallon nationwide, down 8.6% from the all-time high set in June, according to the AAA auto club. By comparison, the average gasoline price has dropped 25% from its record high to $3.76 per gallon. Diesel prices are up 47% from a year ago.
Diesel Prices Threaten Global Recession
Diesel prices in the EU and the U.S. are showing their sharpest increase in months, adding to inflationary pressures and heightening the risk of a global recession, Bloomberg reported on Wednesday.
Earlier this week, Europe’s benchmark diesel price approached $180 a barrel. In the U.S., prices in California exceeded $190, while in New York Harbor they were close to $170.
The spike in diesel prices is driving inflation ahead of winter and raising the prospect of supply disruptions, particularly in the EU, which will start enforcing its embargo on Russian oil and petrochemicals in February 2023.
“Higher diesel prices have the potential to create even stronger inflationary pressures, especially if the current price spike is sustained, adding significant downside risk to demand and increasing the chances of a global recession,” Mark Williams, research director for short term oils at WoodMackenzie, told Bloomberg.
Strikes at French refineries, which have halted fuel supplies and led to diesel shortages, are another factor driving up prices.
On Tuesday, French authorities warned they would be forced to intervene if energy industry workers refused to end their strikes, which have left almost a third of the country’s fuel stations short of supplies.
In September, analysts warned that the looming EU embargo on Russian oil would continue to inflate diesel prices across the bloc. While currently more than a third of the fuel keeps arriving from Russia, when the ban comes into force, Europe will have to replace Russian diesel either by ramping up its own production or importing from countries such as Saudi Arabia, India or the U.S. at a much higher price.
Sanctions On Russia Behind EU Diesel Shortage
A sharp slump in diesel reserves across the EU is expected this winter once the ban on exports of Russian oil and petroleum products comes into effect, Bloomberg reported on Wednesday.
According to Wood Mackenzie estimates, diesel reserves in northwestern Europe will plummet to 210.4 million barrels in February, the lowest since 2011, while the looming embargo on Russian crude scheduled for the same month is driving diesel prices up.
“The drop in February is expected due to the end of Russian imports, at a seasonally high demand period,” the principal analyst at Wood Mackenzie, James Burleigh, said, warning that imports from alternative “longer-haul sources may be constrained.”
Diesel helps power large parts of the European economy, and more than a third still comes from Russia. Given that the EU now needs much more diesel than it can produce, the situation could become even worse due to recent strikes at French refineries, which have halted fuel production.
The consultancy firm noted that continuing disruptions could slash future stock forecasts even further, predicting reserves to slump by almost 6 million barrels in October.
Meanwhile, diesel prices in the EU and U.S. have already seen their sharpest increase in months, with the fuel’s premium to crude oil well above seasonal norms around the world.
Analysts warn that the spike in diesel prices is driving inflation ahead of winter and raising the prospect of supply disruptions, particularly in the EU, heightening the risk of a global recession.
Saudi Arabia Slams U.S. For Manipulation Of Prices
Saudi Arabia’s energy minister, Prince Abdulaziz bin Salman, has criticized nations for tapping their emergency oil stockpiles in order to manipulate prices, and warned of consequences if the reserves run dry.
“It is my profound duty to make clear to the world that losing emergency stocks may be painful in the months to come,” the Saudi minister told the Future Initiative Investment conference in Riyadh on Tuesday.
He noted that the U.S.’ Strategic Petroleum Reserve (SPR) was not intended to relieve price pressures, but instead was meant to address emergency supply constraints. The comments come after US President Joe Biden announced the sale of another 14 million barrels from the SPR, following the release of 180 million barrels of oil since April.
Last week, the U.S. authorities said they would release additional crude from the SPR to keep a lid on America’s gasoline prices and then replenish the reserves. The historic use of emergency stocks has worried investors around the world, as excessive volumes of oil could flood the market and put it under pressure.
According to an oil analyst at Energy Aspects, Amrita Sen, the SPR is now “absolutely being used to keep prices lower even though that is not what it is meant to be used for.”
The Biden administration has reportedly indicated that further tapping of the strategic reserves could be linked to the recent decision of OPEC+ to cut oil production.
OPEC+ announced that countries comprising the group will cut oil production by 2 million barrels per day starting in November. The cuts will be distributed based on quotas under the OPEC+ deal as of August 2022. The curtailing of output is aimed at stabilizing the global oil market ahead of a seasonal drop in demand, and amid fears of a global recession.
Saudi Arabia Duped U.S. On Secret Deal
President Joe Biden reportedly made his controversial July visit to Saudi Arabia, breaking a campaign promise to shun the kingdom, because his administration thought it had secured a secret deal for Riyadh to boost oil supplies. Instead, Riyadh did the opposite, leading OPEC in cutting output targets.
The production increase was supposed to come from September through the end of this year, helping to ease inflation and justify Biden’s trip to Riyadh, the New York Times reported on Wednesday, citing interviews with unidentified US and Middle East government officials. Earlier this month, OPEC announced plans to cut production by two million barrels a day, creating more upward pressure on prices and potentially increasing the risk that the Biden-led Democratic Party will lose control of Congress in November’s U.S. midterm elections.
Several U.S. lawmakers responded by suggesting that Washington should punish Saudi Arabia by cutting off arms sales or removing its military support for the kingdom. Biden accused Riyadh of siding with Russia in the Ukraine conflict and warned of retribution, saying, “There will be consequences.”
Members of Congress who had received classified briefings about the secret oil deal “have been left fuming that Crown Prince Mohammed bin Salman duped the administration,” the New York Times said. US officials told the newspaper that even days before the OPEC announcement, they had been assured by bin Salman that there would be no output cuts. When they later heard that Saudi Arabia had reversed its position on the issue, administration officials made a failed effort to “change minds in the royal court.”
Saudi officials said earlier this month that OPEC’s decision was based solely on economic considerations, not politics, and that Washington tried to delay the move for several weeks. Such a delay might have pushed the announcement past November 8, the date of the midterms. US inflation remains near a 40-year high and ranks as the top concern of American voters, according to polling.
Biden said while campaigning for president in 2019 that he would treat Saudi Arabia as a “pariah” and would make them pay the price” for the assassination of journalist Jamal Khashoggi. The Times said that even some of his strongest supporters have argued that Biden’s decision to meet with bin Salman anyway, after his administration thought it had a secret oil deal in May, was the latest example of “sacrificing principles for political expediency – and having little to show for it.”
“There is now a level of embarrassment as the Saudis merrily go on their way,” said US Representative Gerald Connolly, a Virginia Democrat.
Biden publicly denied in June that he would ask Saudi officials to boost oil supplies. “What happened over the last half-year is a story of handshake agreements, wishful thinking, missed promises,” the Times said.
