China’s decision to suspend exports of oil products beyond Hong Kong and Macau has sent a fresh shock through already strained global fuel markets, pushing oil prices higher as the war between the US-Israel alliance and Iran continues to disrupt energy supplies.
Oil prices rose about 2 per cent on Thursday after Chinese refiners halted exports indefinitely, according to Reuters, adding another source of pressure to markets already grappling with supply restrictions and elevated prices.
The move threatens to tighten supplies of refined products just as governments are drawing on emergency stocks to contain the impact of the conflict.
The US administration has already instructed Germany and France to release diesel from emergency reserves to ease pressure on global markets, with the two countries facing the prospect of a US ban on diesel exports if they refuse.
The latest intervention comes as diesel prices have surged to unprecedented levels, with British motorists facing sharply higher costs.
The average UK diesel price has reached a record 199.18p a litre, putting the £2-a-litre threshold within touching distance. The increase has already translated into hundreds of pounds in additional annual costs for drivers.
A survey by What Car? found that a diesel driver covering 8,000 miles a year could face an additional £400 in fuel costs as a result of the price surge.
The pressure on consumers comes as the global energy system absorbs the consequences of restrictions linked to the Iran conflict. Refineries, shipping routes and fuel supplies have all come under increased scrutiny as governments attempt to prevent shortages from feeding through into inflation.
For Britain, the rise in diesel prices represents another potential inflationary headache. Diesel is heavily embedded in the freight and logistics system, meaning sustained increases can eventually feed into the cost of transporting goods and, ultimately, consumer prices.
The UK government has sought to reassure motorists that supplies remain secure, rejecting reports that ministers were considering fuel rationing or a 50mph speed limit to reduce consumption.
A government spokesman told LBC: “We have a diverse and resilient supply. We continue to engage with our international partners and the UK fuel industry.”
But China’s export restrictions underline the increasingly interconnected nature of the fuel shock. A decision taken by refiners in the world’s largest oil-importing economy can rapidly alter the balance of supply available to international markets.
With diesel already close to £2 a litre in Britain, further disruption could leave motorists, hauliers and businesses facing another round of higher energy costs — adding to the economic pressure created by the conflict.
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