US Diesel Export Ban Could Spark UK Inflation Surge

A potential US ban on diesel exports has sparked concerns that British inflation could soar to nearly 5% due to the UK's heavy reliance on imports. According to forecasters, a prolonged ban could push pump prices to 3 pounds per litre ($2.7), adding as much as one percentage point to UK inflation.

The warnings come after average diesel prices in the UK topped 2 pounds per litre for the first time, with British motoring organisation the RAC noting that filling up a 55-litre tank would now cost an extra 32 pounds. Thomas Pugh, chief economist at RSM UK, said a prolonged US diesel ban could push UK inflation by 0.5%, including indirect effects from price surges filtering down supply chains to consumers.

Pugh noted that the UK would struggle to adjust to losing 20% of its diesel overnight, especially given the widespread use of diesel in industry and trucking. 'Diesel is used in all industry and trucking,' he said, adding that firms couldn't help passing on higher costs to customers.

The potential for a diesel export ban has been linked to plans by the Group of Seven (G7) countries to release up to 100 million barrels of diesel and oil over four months to ease market strains. However, the US administration has indicated that an export ban could be implemented unless European nations release stockpiles to control prices.