The shortage of this fuel, distilled from crude oil, has pushed its price to record highs and threatens to slow down various sectors of the economy, from industry to freight transport and agriculture.
The increase in the price of gasoline as a result of the Russian invasion of Ukraine has raised concerns around the world and deepens the inflation problem affecting several economies on the planet.
But there’s another petroleumderived fuel that’s even more expensive hitting its alltime high in June and it’s causing even more of a headache than gasoline.
This is diesel oil.
At the end of May, the average price of a liter of ordinary diesel reached almost R$ 7, the highest value recorded in the historical series of the National Agency for Petroleum, Natural Gas and Biofuels (ANP).
This caused great dissatisfaction among truck drivers, who criticized Petrobras’ pricing policy.
This Friday (17/06) Petrobras announced new highs in the price of gasoline (up 5.18%) and diesel (up 14.26%) sold to dealers, effective Saturday (18/06). As a result, the average selling price of gasoline to dealers will increase from R$3.86 to R$4.06 per liter. For diesel, Petrobras’ average selling price to dealers will increase from R$4.91 to R$5.61 per liter.
The amount charged at the pumps depends on the taxes and the profit margins of the distributors and dealers.
On Wednesday (15 June), the plenary session of the Chamber of Deputies again approved the draft law that limits the ICMS (Tax on Circulation of Goods and Services) levy on fuel to 17%. The proposal had already been approved on Tuesday evening but had to be revised after the plenary presented technical problems. The text also limits the tax on electricity, public transport and telecommunications.
As the bill was already approved in the Senate on Monday, it will now be approved by President Jair Bolsonaro (PL), the defender of the proposal.
The government is putting pressure on Petrobras not to increase the price of diesel the stateowned company, on the other hand, recently warned of the risk of fuel shortages if there is no readjustment.
However, experts heard from BBC News Brasil claim there is no guarantee that this measure can actually reduce fuel prices.
Most worryingly, the rise in the price of diesel is due to the global shortage of this fuel, which is unlikely to be resolved in the short term.
And the impact of that will hit everyone’s wallet, even if your car doesn’t run on diesel.
Queues for diesel fuel in Colombo, the capital of Sri Lanka, one of the affected places.
Image: Reuters
There?
Because diesel is the fuel used by most cargo vehicles, from the trucks that carry our groceries, medicines, and even the gasoline we fill up at gas stations, to the ships that transport goods around the world.
It is also used by many buses and trains.
And it is this fuel that many industries depend on to power their machines and that agricultural producers need to run their tractors and be able to sow and harvest.
The shortage of diesel is therefore causing serious problems worldwide, which threaten to spread if demand continues to outstrip supply.
global crisis
The scarcity of this fuel is causing mobility problems in places as scattered as Sri Lanka, Yemen and several African countries.
In addition to Brazil, the rise in diesel prices has also prompted protests from indigenous communities and farmers in Ecuador.
Another region where the crisis has raised enormous concerns is Europe.
Because unlike in many other parts of the world, many private car drivers on the old continent drive with diesel because it is a more efficient and environmentally friendly source of energy than petrol.
Before the war in Ukraine, Europe imported about twothirds of the crude oil it refined to make diesel from Russia.
But after the economic sanctions imposed on Moscow by the West, Europe became dependent on the United States for much of that fuel.
While this prevented shortages, the impact on pockets was felt, with record prices on both sides of the Atlantic.
While Brits today pay more than £100 (US$125) to fill up their car worth about US$2.30 per liter truck drivers in the US pay US$1.50 per liter, the highest value ever recorded in this country.
Rising diesel fuel is affecting freight transportation in the United States.
Image: Getty Images
“Rate increases are so high in some states that truck drivers have to pay out of pocket to have goods transported, and many are becoming more selective about their trips,” Fortune magazine reported in midMay.
“Some smaller trucking companies are struggling to pay wages and are considering downsizing or even closing operations due to high costs.”
For its part, The Wall Street Journal noted that “costs are particularly affecting the smaller truck fleets, which make up most of the highly fragmented US truck market.”
shortage in Argentina
At the other end of the American continent, the shortage of diesel is also causing chaos for Brazil’s neighbors.
On routes in central and northern Argentina, long lines of trucks wait to fill up with this fuel, which in many places is limited to 20 liters per vehicle (a small fraction of the tankful).
Nineteen of Argentina’s 23 provinces are facing supply problems, according to a study conducted in early June by the Argentine Association of Freight Transport Operators (Fadeeac).
“The diesel shortage threatens to hurt one of the key moments in Argentina’s weakened economy: the harvest and subsequent cultivation of grains and oilseeds such as soybeans, corn and sunflowers, which are the country’s top exports,” says BBC News correspondent Veronica Smink Mundo, the BBC’s Spanishlanguage news service, in Buenos Aires, Argentina.
Smink explains that Argentina’s diesel shortage has worsened as local factors have contributed to global supply shortages, further complicating the situation.
Diesel oil is indispensable for harvesting and sowing in Argentina.
Image: Getty Images
“Nearly a third of the diesel consumed in the country is imported and the oil companies not only have greater difficulty in sourcing (the fuel) due to the effects of the war in Ukraine, but it is also not profitable for them to get it at current prices to import because of the low local prices imposed by the government,” he says.
causes of the crisis
But the Russian invasion is not the only reason why there is a shortage of diesel.
Even before Vladimir Putin ordered the Russian offensive in late February, global demand for diesel exceeded supply.
The main reason for this mismatch, according to experts, was the coronavirus pandemic.
The economic standstill caused by the 2019 and 2020 quarantines led to a collapse in fuel consumption, prompting refiners to reduce their diesel production.
Some have even closed their doors permanently and others have chosen to switch to refining renewable fuels as part of the energy sector’s transition to cleaner, greener sources.
When the world opened up again from 2021, demand for diesel quickly outstripped supply.
Venezuela was one of the first places to suffer from diesel shortages.
Image: Reuters
Additionally, since jet fuel is made from the same amount of crude oil as diesel, there was a quick resumption of commercial flights.
Reuters market analyst John Kemp has warned that this increase in demand has prompted many countries in North America, Europe and Asia to run down much of their diesel stockpiles.
In Europe and the US, stocks have fallen to their lowest levels since the 2008 financial crisis, he notes.
A U.S. government official told reporters in late May that U.S. President Joe Biden was discussing the possibility of using a diesel emergency stockpile that was built more than two decades ago in the country’s northeast and has only been used once so far, to mitigate the impact alleviate Hurricane Sandy in 2012.
The goal would be to increase fuel supplies at lower prices, which helped push the US into the highest inflation in four decades and could cloud the ruling Democratic Party’s performance in November’s general election.
But analysts warn that the impact of the Northeast’s emergency reserve release will be limited as the millions of barrels of diesel dumped on the market would not be enough to affect prices.
economic impact
For Kemp, the global shortage of diesel is “a harbinger of an impending economic downturn.”
“The global diesel shortage suggests that the economic cycle is peaking and that a period of slower growth or even recession is imminent to kickstart consumption,” he says.
The World Bank’s latest economic report, released this week, confirms that the world is experiencing “a sharp slowdown in growth” and warns that this could lead to “stagflation”, the combination of low economic growth and high inflation.
“For many countries it will be difficult to avoid a recession,” said American David Malpass, President of the World Bank, at the presentation of the report on June 7th.
The World Bank estimates that the global economy will grow by 2.9% in 2022, about half as much as in 2021 (5.7%). Growth of 1.5% is forecast for Brazil.
For its part, the Organization for Economic Cooperation and Development (OECD) reduced its forecast of global economic growth for this year from 4.5% to 3% and estimated that there will be average annual inflation of 8.5% in its 37 member countries.
“This text was originally published at https://www.bbc.com/portuguese/internacional61842567.”