Energy expert: "There will be enough gas, the key problem is... "

Energetic expert Jasminko Umičević has outlined the current state of energy markets, emphasizing that while there will likely be enough gas available, diesel prices could remain high due to global supply issues and structural challenges within Europe’s refining sector. According to reports from local media, Umičević stated that Croatia does not face a real risk of fuel shortages, though he warned that prices might continue to rise. The situation is influenced by disruptions in the global oil market, particularly around the Strait of Hormuz, which has led to reduced supply and increased costs. The expert noted that European refineries have significantly reduced their capacity over the past two decades, with a 30% decline in refinery output. This reduction, driven by economic factors such as the preference for importing rather than producing, has left the continent vulnerable to fluctuations in supply. As a result, Europe's demand for diesel far exceeds its production capabilities, making it heavily reliant on imports. Umičević pointed out that this dependency has become more pronounced after sanctions against Russia shifted the primary source of diesel from Russian exports to Arab countries, which themselves have faced logistical and political challenges. Compounding these issues is the changing landscape of diesel sourcing. Prior to recent geopolitical tensions, Russia was the main supplier of diesel to Europe. However, following sanctions, many European nations turned to Arab producers. Now, however, problems persist with these suppliers, exacerbated by new tactics aimed at damaging infrastructure, including refineries. These disruptions have contributed to a tight supply situation, leading to higher diesel prices despite relatively stable crude oil prices. A key factor in Croatia’s energy security is the Rijeka Refinery, which plays a crucial role in domestic diesel production. Recently, a lightning strike caused a temporary disruption at the refinery’s transformer station. While Umičević believes that the issue can be resolved quickly if it is solely related to the transformer station, he emphasized that the refinery is still operating below full capacity due to ongoing testing. Full operational capacity is expected to be achieved in the coming year, although the refinery currently contributes to reducing dependence on imports. Looking ahead, Umičević expects diesel prices to potentially rise again in the coming week. Although the price of crude oil has recently declined, diesel prices have remained elevated and continue to climb. He highlighted that the price increase for diesel has been disproportionately greater than that of crude oil. For instance, during the height of the Iran-US conflict in the Strait of Hormuz, crude oil prices rose from approximately $71 per barrel to $126, while diesel prices surged from around $750 to $1,300 per barrel. Even after the situation stabilized, crude oil prices have dropped slightly to around $94, while diesel prices have remained largely unchanged and continue to trend upward. Despite these concerns, Umičević expressed confidence that Croatia will have sufficient gas supplies, citing the country’s efforts to fill its Okoli storage facility to 85% capacity by October 1st. Currently, the facility is about 51% full, and Umičević described Croatia’s mix of sources, LNG terminals, domestic production, and diversified imports, as relatively secure. However, he acknowledged that one challenge is the discrepancy between current and future gas prices, which makes it less economically viable for users to purchase gas at present rates. This dynamic means that while supply is adequate, the cost remains a critical concern.