President Donald Trump's surprise move to ease diesel supply concerns ahead of the November midterms by striking a deal with Russia is unlikely to have a meaningful impact on prices, analysts warn. On Sunday, Trump declared an "energy ceasefire" between Russia and Ukraine, prompting a temporary dip in oil prices before they later rebounded. The deal involves Russia releasing 300,000 metric tons of diesel immediately, followed by another 500,000 tons in November, and 1 million tons afterward, with the potential for 3 million tons depending on refinery conditions. Despite the U.S. Treasury easing sanctions to facilitate the deal, critics argue the volumes are insufficient to address the global diesel shortage.
The U.S. is facing record-high diesel prices, averaging $6.5276 per gallon in late September, driven by supply disruptions from the wars in Ukraine and the Middle East. While the deal has drawn opposition for bypassing Russian sanctions, some analysts note it could ease inflationary pressures in key sectors like transportation and agriculture. However, skeptics like Neil Atkinson, former head of the Oil Division at the International Energy Agency, question the feasibility of the promised volumes, suggesting they may come from domestic Russian supplies, which could cripple the Russian economy.
Analysts at Quantum Strategy in Singapore predict the deal will fail economically and warn that it could embolden Russian President Vladimir Putin to escalate tensions in Europe. They anticipate negative effects on the Euro and EU sovereign debt as European powers respond to heightened security threats. Meanwhile, the G7's recent authorization of 50 million barrels of oil products has had little impact on diesel market tightness, raising doubts about the effectiveness of the U.S.-Russia deal.
Trump's effort to tamp down inflation ahead of the midterms comes as 84% of registered voters consider the economy "very important" to their vote, according to the Pew Research Center. Despite the political motivation, analysts remain skeptical that the deal will provide substantial relief to diesel prices or the broader economy.