Russia's Natural Gas Supply Pressure Eases with Loosened Sanctions on Alternative Imports
Concerns Grow Over Winter Diesel Shortage... Diesel Vehicle Sales Also Decline
[Asia Economy Reporter Hyunwoo Lee] The European Union's (EU) imports of Russian diesel last month increased by more than 20% compared to the previous year. Although the EU has imposed bans on imports of Russian oil and petroleum products, including diesel, as part of sanctions against Russia, the demand for diesel, an alternative energy source, has risen due to Russia's pressure on natural gas supplies, making it difficult to enforce the import ban. Concerns over diesel shortages within Europe have also led to a decline in diesel vehicle sales.
According to the UK Financial Times (FT) on the 2nd (local time), energy analytics firm Vortexa reported that in July, EU countries imported 700,000 barrels of Russian diesel per day, a 22% surge compared to the same month last year. This is attributed to Russia's reduction of natural gas supplies as a retaliatory measure against sanctions following its invasion of Ukraine, which has significantly increased demand for diesel as an alternative energy source.
The EU had previously decided to reduce imports of Russian oil and petroleum products to 'zero' by February next year as part of sanctions and had also restricted diesel imports. However, amid the escalating energy crisis, some sanctions have recently been eased. Direct trade with Russia is impossible, but indirect trade through third countries remains possible.
In particular, with natural gas prices soaring to unprecedented levels in Europe, concerns are growing that diesel demand will increase further. JP Morgan warned in a report, "As natural gas prices surge, energy companies and manufacturers are shifting to diesel for power generation and heating energy, and global demand could increase by more than 700,000 barrels per day during the winter," adding, "Diesel prices could also reach entirely new record highs."
Within Europe, concerns over a diesel shortage have led to a decrease in diesel vehicle demand. According to the European Automobile Manufacturers Association (ACEA), in its report on the European car market released on the 20th of last month, diesel vehicle sales in the EU during the second quarter of this year totaled 409,000 units, a 27.7% decrease compared to the same period last year.
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