UK in Talks to Prevent Potential US Diesel Export Ban as Prices Hit Record High

UK Diesel Prices Reach Record Highs

The average price for a litre of diesel in the United Kingdom hit 199.33p on Monday, according to data from the RAC. This figure surpasses the previous record of 199.09p, which was set in June 2022 following the start of Russia’s full-scale invasion of Ukraine. Petrol prices have also experienced upward pressure, currently costing 174.23p per litre.

The price surge is largely attributed to supply chain disruptions caused by ongoing conflicts in the Middle East and the war in Ukraine. According to the RAC, diesel prices have entered “uncharted territory,” highlighting the vulnerability of the UK market to geopolitical events occurring internationally.

Diplomatic Talks Over US Export Restrictions

The potential for a US diesel export ban has emerged as President Donald Trump considers measures to lower domestic fuel costs ahead of upcoming midterm elections. President Trump stated over the weekend that the administration is thinking about a ban “very seriously.” The UK relies on the US for approximately one-third of its diesel imports, making any restriction a significant threat to domestic supply.

Chancellor John Healey, speaking from the Labour Party Conference in Liverpool, described the current diesel prices as “extreme.” He noted that the government is in active discussions with the US to mitigate the impact. We work very closely with the Americans. In the end, we’re also working with the Americans where we can try and put in place what will solve this, or at least significantly ease it, which would be a diplomatic settlement [and] an end to the fighting with Iran, Healey said.

Economic Risks of a Potential US Ban

Energy analysts warn that a US export ban intended to provide short-term domestic relief could trigger broader economic consequences. David Fyfe, chief economist at Argus Media, stated that cutting off American supply would likely cause international prices to spike, potentially “feeding inflation back into the global economy” through higher freight, food, and industrial costs.

Sarah Raffoul, an analytics manager at Argus Media, noted that while higher international prices might eventually curb demand, the removal of over a million barrels of daily American supply would likely lead to a fierce bidding war among importing nations in Europe and Latin America. Analysts further suggest that such a move would damage the reputation of the US as a reliable global energy supplier.

Government Preparations for the October Budget

As the government prepares for the October 28 Budget, Chancellor Healey is balancing concerns over the cost of living with the need to manage public finances. The UK government is currently making provisions for the potential export ban by utilizing existing domestic stocks.

The government also faces a decision regarding fuel duty. A freeze on fuel duty implemented in 2022 is set to expire at the end of the year, with scheduled increases of 3p in January and an additional 2p in March. Healey emphasized that a diplomatic settlement in the Middle East remains the primary solution to easing the cost burden on households and businesses.