But releasing 400 million barrels of oil reserves bring down the prices of the pumps.
It's World Business Express from the BBC World Service.
I'm Leanna Byrne.
Why are diesel prices higher than petrol right now and inflation in the US hold steady?
400 million barrels.
That is the amount of oil countries which are members of the International Energy Agency will release from their reserves.
Here's the IEA Executive Director, Faith Birrell.
AIA countries have unanimously decided to launch the largest ever release of emergency oil stocks in our agency's history.
That record release of oil from reserves comes as governments seek to contain a spike in energy prices driven by the US-Israel war in Iran.
Our reporter Jonathan Josephs is covering this one.
Liana.
It's certainly a significant intervention from the International Energy Agency, but 400 million barrels of oil is roughly what the world uses over the course of four days in normal circumstances.
It's what, before this war, would flow through the Strait of Hormuz in about 20 days.
It is a significant amount, but in the sense that...
This is about a third of the collective stocks of the 32 governments that make up the International Energy Agency.
It's not something that they can repeat frequently.
Now, we saw strategic reserves used after Russia's invasion of Ukraine in 2022.
How does this release compare with that?
Well, this is about twice the size.
There were actually two releases because of that.
And it's actually this is only the sixth time that the International Energy Agency has done anything like this in its history.
It was created in 1974 for exactly this sort of scenario.
It came about in the aftermath of the 1973 Yom Kippur War, which led to the Arab oil embargo, which saw Middle Eastern countries stopping supplies of oil to the United States, which caused a big economic shock there.
And that's actually what these governments are worried about.
Now we're already starting to see the ripples across the global economy of these restrictions to energy flows, because energy is the lifeblood of economies everywhere.
Well, Jonathan, that brings me to my last question.
The big question I think for a lot of consumers is could this actually bring down petrol and diesel prices?
Well, it seems, on the face of it, it's going to have a very limited impact, because prices fell when this was announced, but then rose back again quickly.
And the question that energy traders want to know is when are things going to go back to normal?
When will we stop having to rely on stocks of energy and actually be able to get the stuff flowing again?
Jonathan Joseph's there.
Here's the thing.
Many of us have been eyeing the prices ticking up at the pumps and no fuels have been immune.
But diesel has been particularly badly hit.
In France, the cost of diesel has already climbed above two euro per litre at the pump, which is almost nine dollars a gallon.
84 euros for 41 litres of diesel.
It's very expensive.
But what can you do?
I don't really have a choice.
Unfortunately, I'll have to pass the increase on to my customers.
Diesel's going to go above 2 euros.
And tomorrow, it could rise again.
So why has the price of diesel risen faster than other fuels?
I've been speaking to Steve Irwin of Portland Fuels, based in York in the northeast of England.
Within Europe, we are a net exporter of petrol.
So with Europe being a net exporter of petrol, petrol tends to be cheaper in Europe than diesel.
The other thing that you've got to take into account is taxation.
And across Europe, diesel is taxed predominantly less than petrol, but it's not in the UK.
They're both taxed exactly the same.
And so you're looking at the wholesale rate.
And if we've got more petrol around than we have diesel and we don't need it, we can export it.
That's why petrol generally tends to be cheaper than diesel.
So if you were to compare the increase between diesel and petrol, what's the disparity there?
How much has diesel gone up by compared to petrol?
Yeah, so these commodities are traded in US dollars per metric tonne.
And for diesel, we're looking at a rise of just over $300 a tonne.
And that's from a base of about 750.
So you can see the 40% increase there.
Petrol has gone up by about $175 a tonne.
And petrol started just under the 750.
It was around about the $700 a tonne mark.
So you can see significantly less increase on the petrol price.
And then when it comes to airplanes and the fuel that they use, that's completely different, isn't it?
That's gone up by even more.
Yes, it has.
So jet fuel suffers from the same problem that diesel does.
We use more jet fuel in Europe than we produce, and we don't produce that much.
And we're in a declining situation.
So, As refineries are closing, we're producing less jet fuel year on year, but we're actually using more jet fuel year on year as we increase our aviation capacity throughout the continent.
We're actually importing around about 700000 barrels per day of jet fuel to meet that demand at the moment.
That was Steve Irwin from Portland Fuels.
Throughout this Middle East war, Israel has continued to attack Hezbollah targets in Lebanon.
Much of the country's economy has grounded to a halt as a result.
Very few cargo ships are currently reaching Lebanon.
One Beirut restaurant owner, Aline Kamakian, is worried about food supplies if imports don't resume soon.
We cannot live without the importation of food.
We don't have enough, especially now that the South is gone and the South is one of the major place of farmers.
You have all the citrus parts in the South and you have the Bekaa Valley, which is bombarded also, which is the part of the grains.
So you are surrounded and your country is being hit.
So the farmers cannot work.
The sheep are not there.
You know, like the situation is not very comfortable.
If we don't import, it's going to be very harsh.
That was Beirut restaurant owner Aline Kamakian.
Of course, rising oil prices tends to lead to higher inflation.
But in the US, consumers are also dealing with higher costs of imports, partly as a result of tariffs introduced by President Donald Trump.
Let's hear from some American shoppers in Gainesville, Florida.
We have seen the prices go up over the last couple years, and we've just adjusted accordingly.
I haven't seen any prices falling, except gas a little bit, but that happens seasonally traditionally.
But the Democrats caused this massive inflation and the massive gas prices, which I feel led to massive inflation recently.
I'm a single mom of two boys.
My grocery bill is ridiculously higher than it was.
I don't remember.
I don't necessarily track it, but it's much higher than it was.
I'm not happy.
I'm absolutely not happy.
I'm a little disappointed because I figured once Biden got out there things would come down in prices.
But it hasn't.
Now, America's latest inflation figures have been released in the last few hours, with annual consumer inflation unchanged at 24.
Russ Mould, Investment Director at AJ Bell is with me.
Russ, important to say this is before the war.
Absolutely correct.
I mean, as you say, no change from January in line with economists' forecasts, but still above target, and also does not account for the increases we've seen in oil and gas or the impact of the war.
So US government borrowing costs, as measured by the bond market, have increased a little bit and investors have started to slightly give up on the number of rate cuts that they expect from the Federal Reserve this year.
They now may be expecting one by this Christmas and another one by Christmas 2027.
That's only less than we'd have been talking about at the start of the year.
But I think it's interesting.
Everyone thought the tariffs was going to really hit inflation, but that doesn't seem to have happened.
Not as yet.
I think this year was always going to be the biggest test.
I think some companies...
Because the president had said he was going to do this.
Very clearly, companies had prepared, they'd built inventory, they'd built stock, they were ready.
They were able to swallow some of the costs initially.
It was in a question of how much would they have to swallow, for how long could they do it and when would they start passing on prices.
So this year was always probably going to be the bigger test than last year.
And they might have to be swallowing oil prices as well.
Well, this is an even bigger challenge.
There's an awful lot of industries that in some way, shape or form consume energy, and therefore you will.
If the oil and gas price stay high and they're up about well oil by a third from when the war started that could start to filter through to inflation in time.
Yes,
Okay.
Ross Mould, Investment Director at AJ Bell.
Thank you so much for joining us.
And that is it from World Business Express.
I'm Leanna Byrne.
Have a great day and thanks so much for listening.
