Juan Cole Informed Comment
President Trump on Sunday warned Ukrainian President Volodymyr Zelensky to stop striking at Russian diesel refineries. While these Ukrainian strikes have had an impact on global diesel supplies and prices, since Russia is keeping what diesel it does produce for the domestic market now, the Netanyahu-Trump war on Iran is far more consequential for diesel prices. Trump’s squawk this weekend tells me he knows he has no influence on the course of affairs in the Middle East, but hopes he does have leverage with Zelinsky.
It also tells me that Trump is in deep trouble with his electorate over diesel prices, which affect commodity prices generally, and that he is desperate.
Unfortunately for the president (though it is entirely his fault), the other shoe has dropped in the long-awaited impact of the war on fuel prices, with the drone strike by an Iraqi Shiite militia on the Saudi East-West pipeline late last week, which damaged a pumping station as well as the pipeline. The equipment may take up to six weeks to repair, which will take us to the November midterms. Even if it is repaired more quickly, at least partially, the damage will put up gasoline and diesel prices in crucial weeks before the US election, during which people make up their minds about whether the country is going in the right direction.
According to a late August Reuters/ Ipsos opinion poll, nearly half of respondents say that the cost of living is the number one issue determining how they will vote, and 71% already thought then that Donald Trump was doing a poor job handling this issue.
Meanwhile, Brent Crude topped $102 a barrel on Sunday for the first time since the hot war on Iran last spring.
And the price of diesel for trucking in the United States rocketed past $6 a gallon, raising fears of an inflationary spiral. Diesel cost $3.71 a gallon last year this time. An estimated 1.5 million barrels a day of diesel has been taken off the market since February 28, and the Saudi pipeline strike just added to that total.
Some 70% of the goods in retail stores in the US are transported there by trucks, and if diesel fuel is expensive, it affects the price merchants have to charge for their merchandise. AP points out that fresh produce and meat, which have to be restocked frequently, are especially liable to price rises in this situation. Moreover, most farm equipment runs on diesel, raising farmers’ costs, which they pass on to the retailers and thence the consumers. The wire service reports that fuel accounts for 15% to 30% of the cost of food items. Diesel is up 62% over last year, so you do the math.
Diesel prices have risen even higher in Africa and other parts of the global south.
The cost of diesel fuel will be affected by the strike on the Saudi pipeline, since it will idle the refineries at Yanbu, which had produced three times as much diesel as gasoline. The refineries won’t be able to work this fall if the pipeline can’t be swiftly repaired, and it doesn’t appear that it can.
Photo by Giulia Lorenzon on Unsplash
Priyanka Shankar at Al Jazeera reminds us that there is yet another driver of inflation in all this. Refineries produce gasoline, diesel and distillates, and sell the heavy fuel oil (HFO) left over, “bunker fuel,” to shipping companies. But there is a shortage of bunker fuel. Not only has the Netanyahu-Trump war on Iran taken several million barrels of crude oil off the market daily, but the high price of diesel means that refineries are now making another pass at the HFO and turning it into diesel rather than selling it at a lower price for ships. Less supply and stable demand equals higher prices, and there could even be shortages that idle container ships. More than 80% of goods traded globally are transported over the water.
Things are going to cost more, with negative effects on household purchasing power. Essentially, by launching their foolish war on Iran, Netanyahu and Trump have given pretty much everyone in the world a salary cut. I fear that fertilizer shortages and high fuel prices may well lead to a large number of deaths. There is always food in a famine, people just can’t afford it anymore. With the Trump administration’s weakening of the social safety net at home, and Elon Musk’s wanton destruction of USAID abroad, the likelihood of some people becoming malnourished or even starving because of these developments has increased substantially.
Editor’s Note: At a moment when the once vaunted model of responsible journalism is overwhelmingly the play thing of self-serving billionaires and their corporate scribes, alternatives of integrity are desperately needed, and ScheerPost is one of them. Please support our independent journalism by contributing to our online donation platform, Network for Good, or send a check to our new PO Box. We can’t thank you enough, and promise to keep bringing you this kind of vital news.
You can also make a donation to our PayPal or subscribe to our Patreon.