The G7 agreed on Friday to put 100 million barrels of diesel and other fuels on the market from emergency stocks. A few hours later Donald Trump told reporters at the White House that the US would not be banning diesel exports.
That sequence is not an accident. Washington had spent the better part of a week leaning on Europe, and Europe blinked.
Leaders met by video call chaired by Emmanuel Macron, since France holds the G7 presidency this year. The joint statement says the release runs through the IEA, starts immediately and stretches over four months. The first 20 days are supposed to carry a "front-loaded" and substantial diesel release from G7 members and partners.
They also said they'd meet again inside the IEA in the coming days to talk about more diesel if it's needed. So 100 million may not be the final number.
On exports, the leaders promised not to restrict energy shipments between G7 countries and asked other producers to do the same. Macron told reporters the move should push down petroleum product prices, diesel most of all. He also made a point of saying tanker traffic is recovering: by his count, roughly three-quarters of prewar volumes are moving between Hormuz and the Yanbu pipeline.
It wasn't friendly. Reuters reported that the Trump administration told France and Germany on Thursday that a US diesel export ban was possible unless they drew down their inventories. Trump had been saying for days that he was looking at a ban "very seriously."
Europe leans hard on American diesel. US exports hit a record of about 1.6 million barrels a day in August, according to ship-tracking data. Cut that off and European buyers feel it first. Politico's headline on the mood in the capitals was one word in quotation marks: "blackmail."
Before the G7 text was even out, Trump posted that Europe had "just agreed to release a massive amount" of diesel. Later he said the ban "was never really on the table."
His own cabinet would agree with that, in a way. Energy Secretary Chris Wright had already called an export ban a blunt tool that doesn't work, and a White House official told Politico days earlier that no ban was under consideration. Then the president said he was looking at one. It was a confusing week to be an oil trader.
Retail diesel in the US recently touched a record $6.52 a gallon. That number shows up everywhere: trucking rates, farm costs, grocery bills. In the northern states it also heats homes. Senator Susan Collins put out a statement saying about half of Maine households burn fuel oil, and thanked Wright for calling her with the news.
Inventories are tight. One market analysis had US on-road diesel stocks around 97 million barrels, nearly 13 percent under the five-year seasonal average, and that's with refineries running close to flat out.
And the midterms are about a month away. Nobody in the administration has to say out loud what pump prices do to an election.
For a while, probably a bit. Bloomberg's read is that the release will give short-term relief and not much more. Crude dropped on the reports, which is what markets do when a big number appears.
Run the arithmetic, though. In March, IEA members agreed a record release of around 400 million barrels, and the Hormuz disruption was then being put at about 20 million barrels a day. Spread 100 million barrels over four months and you get something under a million barrels a day.
Then there's the wording. The statement says the release takes into account commitments "already fulfilled," which leaves a fair question on the table: how much of this is new oil and how much is the leftover from March? AP raised the same point.
Analysts at Energy Aspects told Reuters the promise on export restrictions is a political commitment, not a legal ban, and that the headline barrel count was partly designed to talk Trump out of his threat. If that's right, the barrels were a bargaining chip first and a supply measure second.
The administration is looking at one more option: lifting limits on sales of red diesel. That's the dyed, tax-exempt kind normally reserved for off-road use. Nothing has been announced.
US oil executives, meanwhile, had been telling officials that even a short export ban would force refiners to cut runs and could send global prices higher. One economist quoted by market outlets reckoned world diesel prices could have roughly doubled.
The ban is shelved, for now, and the barrels are scheduled. The IEA is due to meet within days on whether to add more diesel.
