Oil companies warn that the price of diesel in Spain will skyrocket in February

Oil companies warned that the price of diesel will skyrocket in Spain after the Russian crude oil embargo comes into force on February 5.

As reported today, Thursday, January 26, by larazon.es, the heads of oil companies have warned that the price of diesel will skyrocket at the pumps on forecourts in Spain after February 5. Specifically, that is the date on which the EU embargo on buying Russian crude oil comes into force.

The sanctions are designed to starve Moscow from funding its invasion of Ukraine. However, according to sources in the petrol station sector consulted by the news outlet, Europe is still heavily dependent on Russia for its diesel supply.

Compared to when the government’s fuel discount was in place, the cost of petrol has already risen 18 per cent in the first weeks of 2023, and diesel by 15 per cent.

Data from Refinitiv, the global provider of data and infrastructure of the financial market showed that in November 2022, 44 per cent of the imports of this fuel came from Russia.

The reason given for this dependence is the decoupling that exists between supply and demand in Europe. Every day, the continent lacks 1.3 million barrels of diesel that must be bought outside the continent.

This deficit has been blamed by the sector to a large extent on the energy strategy of the European Union. Its strong commitment to disengage from fossil fuels as soon as possible is causing the sector’s investments in this business to have fallen in recent years.

According to data from Concawe, the European employers’ association in the refining sector, in the last 12 years, 26 oil refineries have closed on the continent. This has subsequently reduced refining capacity by 18 per cent, increasing the dependence on third countries.

In this context of production deficit and dependence on Russia, if the supply is going to be further reduced by the entry into force of the sanctions on February 5, and the demand is to be maintained, then the most foreseeable thing is that diesel prices will rise considerably in the coming months.

During the recent Davos Forum, Pedro Sanchez, the Spanish Prime Minister was reportedly warned of the negative effect that this ban will have on fuel prices by the presidents of Repsol and Cepsa.

Josu Jon Imaz, the Chairman of Repsol, and Maarten Wetselaar, the Chairman of Cepsa, reiterated their support for community decisions but outlined the consequences that this decision will have for citizens.

Both companies assured that Spain will not have supply problems because our country does not depend excessively on Russian gas. Attention will have to be paid to the evolution of the price of diesel though they pointed out, especially taking into account that 70 per cent of car sales are still those running on fossil fuel.

A spokesperson for the petrol station sector explained: “Diesel is purchased through annual contracts that have many addends, the most important of which is the international price of diesel itself. If the embargo on Russia causes a shortage and that price increases, that is transferred to the cost of what you pay even if you do not buy Russian diesel directly”.

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