G7 taps 100 million barrels as diesel squeeze tests Europe’s supply lifelines

Europe has paid more than €100 billion extra for fossil fuel imports since the U.S.-Iran conflict began, without getting any additional energy, EU Energy Commissioner Dan Jorgensen said. That bill captures the stakes behind a new G7 plan to release 100 million barrels of diesel and crude oil from emergency reserves, according to The Independent Uganda, reporting Xinhua’s account.

G7 leaders agreed on Friday to spread the release over four months, beginning immediately, through an effort coordinated by the International Energy Agency (IEA). A substantial share of the diesel is due to reach the market within the first 20 days, supplied by G7 members and partners. The group did not disclose the split between diesel and crude, or how many countries would contribute. It left open the possibility of further diesel releases.

A fuel squeeze with two pressure points

The immediate problem is a shortage of refined fuels, particularly diesel. According to the IEA, net diesel and gasoil exports from Gulf countries averaged only slightly more than a quarter of their levels before the U.S.-Iran war, with shipping through the Strait of Hormuz still severely constrained. IEA Executive Director Fatih Birol said Ukrainian attacks on Russian refineries had compounded the supply pressure and pushed prices higher.

For Europe, the squeeze has become an affordability problem. The European Commission said on Friday that diesel prices had doubled since the war began at the end of February. The new release also follows a large earlier intervention: Birol said about 325 million barrels had already been released under the collective action announced in March. That represents more than 80% of the 400 million barrels originally pledged, the biggest such action in IEA history.

The G7 is also targeting the plants that turn crude oil into usable fuel. Members agreed to coordinate refinery maintenance so plants do not shut down at the same time, temporarily run refineries harder where possible, and encourage countries with substantial refining capacity to increase output, especially diesel. Those measures accompany the reserve release rather than relying on stored fuel alone.

Relief now, dependence later

The agreement followed pressure from Washington. The Trump administration had urged European governments to release more emergency diesel and warned of possible restrictions on U.S. diesel exports if they did not act. Europe has much to lose from such a move: the Commission said the United States supplied around half of EU diesel imports in August. Hours before the G7 deal, it rejected the prospect of a U.S. export ban, saying neither side would benefit and trust would suffer.

The eventual agreement paired stock releases with a pledge not to restrict energy exports between G7 members. European Commission President Ursula von der Leyen welcomed the deal. For buyers, the immediate question is how much diesel arrives, and how quickly. Wood Mackenzie’s Alan Gelder, senior vice president for refining, chemicals and oil markets, estimated that a major diesel release could cut wholesale prices by $20–$30 a barrel.

Further reserve releases buy time while diesel supply remains below demand, according to Wood Mackenzie’s Alan Gelder.

That leaves the longer-term challenge unresolved. Gelder warned that inventories continue to fall and Europe remains exposed to other countries’ export policies, including those of the United States. Watch the early diesel deliveries, any decision on additional releases, and the recovery of refined-fuel flows from the Middle East. With the U.S.-Iran conflict difficult to resolve, a quick return to steadier supplies remains uncertain.