As midterm elections approach, US President Donald Trump announced a deal with President Vladimir Putin for immediate supplies of Russian diesel. Prices for gasoline and diesel have more than doubled since the US-Israel conflict with Iran began in February, putting pressure on transport businesses, farmers, and drivers.
Prices at the pump have soared across America following the outbreak of the US-Israel conflict with Iran in February. According to the BBC, gasoline and diesel prices have more than doubled since the hostilities began. The disruption effectively halted the usual flow of oil and refined products through the Strait of Hormuz for months, restricting global oil supplies. Although the flow of crude oil is nearly back to pre-war levels, prices remain above $100 a barrel, creating a sustained knock-on effect for diesel and gasoline.
Polling shows that a majority of Americans disapprove of the administration’s handling of the economy and the war in Iran. With just a few weeks left before voters head to the polls for the midterm elections, growing calls have demanded more action to bring fuel costs down.
Trump Announces Russian Diesel Deal and Red Dye Waiver Ahead of Midterms
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President Donald Trump announced a deal with President Vladimir Putin to release Russian diesel immediately to the United States and global markets. According to reporting from the BBC, the initial agreement includes the immediate supply of over 300,000 tonnes of diesel, followed by 500,000 tonnes in November and an additional million tonnes immediately thereafter.
Lower prices for Americans, especially our Great Farmers, Ranchers, and Truckers, is my Greatest Priority.
Donald Trump, US President
Trump stated that this arrangement would cause diesel prices in the US and globally to come down in record numbers and fast. He also noted that a further 3m tonnes of Russian diesel would be delivered within a short period afterward, depending on the condition of its refineries. In addition to the diesel import arrangement, Trump announced a waiver on the use of red dye diesel.
Analyst Estimates on Supply Impacts and Policy Limits
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Energy market experts point out that multiple geopolitical factors drive the current price spike. David Ruisard, pricing manager for commodities intelligence firm Argus, estimates that the climb in diesel prices from about $3 a gallon up to $6 a gallon is 60% connected to the disruption in the Strait of Hormuz. Ruisard notes that the ongoing Russian war with Ukraine accounts for the remaining 40% of the price increase by impacting broader oil supplies.
Patrick De Haan, head of petroleum analysis for fuel price tracking website GasBuddy, believes the president has essentially pulled all the small levers available to a president, yet prices remain very elevated. De Haan observed that Indiana cut its tax on gasoline in May, which cost that state government $1bn (£760m) in lost revenue.
Trump has previously supported calls to ban diesel exports from the US. While Oxford Economics chief US economist Michael Pearce notes that such a ban would provide partial relief in the Gulf and Midwest, it would offer little benefit to the Northeast and West Coast. Furthermore, Pearce warns that export restrictions risk backfiring by causing diesel stockpiling; once storage runs out, refineries would need to cut back production, ultimately raising prices for other energy products like gasoline.
According to De Haan, the only meaningful path to lower gas prices is solving one or both of the underlying geopolitical tensions. That requires reaching a deal with Iran and helping facilitate an agreement between Ukraine and Russia—issues that cannot be directly controlled by the White House. Ruisard added that even if those conflicts are resolved, physical damage to Middle East facilities from military strikes means production would still take four to six months to return to normal, signaling that elevated fuel prices are set to persist for some time.
