EU’s Russian Oil Ban Triggers Sharp Rise in Diesel Prices

(MENAFN) The European Union’s latest sanctions, which prohibit imports of oil products derived from Russian crude, are triggering a sharp rise in diesel prices across global markets, according to the chief executive of TotalEnergies, Europe’s leading oil refiner.

Last week, the EU unveiled its 18th round of Ukraine-related sanctions, targeting oil products made from Russian crude—even those refined outside EU borders. The package also reduced the price cap on Russian oil to $47.60 per barrel and imposed penalties on over 100 vessels identified by Brussels as part of a “shadow fleet” transporting Russian oil to circumvent sanctions.

European diesel futures have surged recently, occasionally reaching prices equivalent to $110 per barrel, as buyers scramble to source fuel from alternative producers following the EU’s restrictions. TotalEnergies CEO Patrick Pouyanne explained this trend during the company’s second-quarter earnings call on Thursday.

“We think stronger diesel prices will become a persistent feature on the global market,” Pouyanne said, as reported by media. “Diesel now comes from the Middle East or US refineries further away, which raises costs.”

He emphasized that the EU’s ban on fuels refined from Russian crude at foreign facilities has tightened the supply chain even more. Among the targeted entities is India’s Vadinar refinery, partially owned by Russia’s Rosneft, which had previously been a significant supplier of refined Russian products to the EU market.

“People have underestimated this news from the EU,” Pouyanne warned. “There is something, for me, more structural there.”

The CEO highlighted that shifting away from Russian crude has forced refiners to use lighter grades of crude oil, which yield lower diesel output. Many European plants have substituted Russia’s Urals crude with lighter US barrels, complicating efforts to maintain diesel production levels.

This latest ban adds to a series of sanctions implemented since 2022, which restricted direct imports of Russian crude and refined fuels. Experts caution that the EU’s move may have unintended consequences, given the bloc’s ongoing diesel shortage and its heavy dependence on Russia—one of its largest external suppliers. Diesel remains crucial for the EU economy, with over a third of supply previously sourced from Russia.

Russia has condemned the sanctions as illegal, labeling them a “double-edged sword” and warning that each new wave of restrictions further damages the countries that impose them.

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