President Trump once more says that Ukrainian strikes on Russian oil refineries are causing diesel prices to go up.
"This isn't really a Middle Eastern problem, this is more of a Russia problem, that Ukraine and Russia are going at it and Ukraine is blowing up diesel refineries in Russia because they do a lot of the refining."
He added that he asked President Zelenskyy to "go easy on the refineries."
One of the guarantors of the Budapest Memorandum is asking Ukraine to stop strikes on the other guarantor of the Budapest Memorandum.
President Trump called on Ukraine to stop striking Russian oil refineries amid rising diesel prices and the approaching U.S. elections. Before that, Treasury Secretary Scott Bessent and Energy Secretary Chris Wright had also linked rising fuel prices to Ukrainian attacks. The repeated use of this explanation indicates a common position within the Trump administration. Washington wants to ease Americans’ dissatisfaction with fuel prices and use a halt in the strikes as leverage in negotiations with Moscow.
But the reason for the diesel shortage is not Ukrainian strikes. And American citizens themselves know this very well. The main reason is disruptions in supplies from the Persian Gulf. The combined reduction in exports from the Gulf and Russia compared with February reached 1.6 million barrels per day. A rough calculation based on these figures puts about 70% of the losses on the Gulf countries. In other words, if there were no war with Iran, diesel prices in the U.S. would probably not be rising now.
It is clear that rising diesel prices could cost Republicans seats in Congress. According to the EIA, diesel in the U.S. has risen by more than 50% over the past year. Expensive fuel increases costs for trucking companies, farmers, and businesses, eventually affecting the prices of goods. Meanwhile, about seven weeks remain until the November 3 midterm elections, while neither the war with Iran nor Russia’s war against Ukraine shows signs of ending.
Since reaching an agreement with Iran is proving impossible, the administration needs to shift the blame. Emphasizing Ukrainian strikes helps the administration explain higher fuel prices to voters and divert attention from the war with Iran. At the same time, on September 9, Trump himself acknowledged that lower oil prices could depend on the end of the conflict with Iran, which may not happen until after the elections.
Bringing more Russian oil and petroleum products back onto the global market could ease price pressures. The U.S. is indeed seeking this - we can see this in the changing sanctions policy. In March, Washington allowed certain transactions involving Russian oil and petroleum products that were already on vessels. The demand to stop strikes on oil refineries is consistent with this approach.
But will it help? The answer is no. Halting the attacks would not immediately restore Russian exports. Damaged facilities need to be repaired, and supplies of some equipment could take six to eight months. If repairs are delayed or exports remain restricted, additional supplies could be close to zero. Under a scenario of partial recovery within one to two months, we could see an additional 100,000-300,000 barrels per day, or 6-19% of the recorded shortfall. Under a broader recovery over three to six months, the figure could reach 300,000-500,000 barrels per day, or 19-31% of the shortfall. In other words, American consumers would not feel any reduction in prices by the time of the congressional elections.
Under these scenarios, the price reduction at U.S. gas pumps could range from a few cents to several dozen cents per gallon. If an additional 200,000 barrels per day reached the market, the price reduction for American consumers could be around 14 cents per gallon, or 2.3% of a $6 price. Would these amounts actually affect Republican approval ratings or Trump’s personal ratings by any meaningful percentage?
Moreover, the actual price could continue to rise even after Ukrainian strikes stopped. If supplies from the Gulf deteriorate at the same time, the overall price could increase.
At the same time, Russia would gain the opportunity to repair its refineries and stabilize supplies immediately after the attacks stop. Ahead of the September 18-20 State Duma elections, the Kremlin would also be able to present this as a political achievement.
A recovery in exports could bring significant revenue back to Russian companies. At an assumed selling price of $140-180 per barrel, an additional 100,000-300,000 barrels per day would generate $1.62 billion in gross revenue over 30 days.
Supplies of 300,000-500,000 barrels per day would generate $1.26-2.7 billion. This money would primarily go toward financing the Russian war machine.
If Ukraine stops the strikes without reciprocal commitments from Russia, it will lose some of its leverage over the course of the war. In other words, under a partial-recovery scenario, the world could receive an additional 100,000-300,000 barrels of diesel per day, American consumers could see prices fall by several or several dozen cents per gallon, while Russia would gain time to repair its facilities and generate additional export revenue.
For Ukraine, the value of any agreement depends on whether Moscow actually stops its attacks on Ukrainian energy infrastructure and other critical infrastructure. Will Trump demand this from Putin - and will he honor the agreement?