Is there a threat of a diesel shortage?

The price of diesel in Croatia has reached its highest level this year, with a regulated rate of 1.80 euros per liter valid until Tuesday. This marks a slight decrease from the record high of 1.85 euros set in May 2022, though it remains significantly higher than previous years. The current surge in prices is attributed to ongoing tensions with Iran and the blockade of the Strait of Hormuz, which have disrupted global oil supplies. Unlike last year, when the war in Ukraine was the primary cause of rising fuel costs, today’s situation reflects a different geopolitical landscape. Diesel prices have increased by nine cents compared to the previous week, while gasoline prices have risen slightly by seven cents. However, diesel remains the more pressing concern, with industry experts warning of potential shortages both internationally and within Croatia. European diesel reserves are currently at their lowest levels since 2015, according to reports from major American investment banks such as Goldman Sachs and Morgan Stanley. These institutions have highlighted that diesel, rather than crude oil, is the most critical issue affecting fuel supply in Europe, predicting that reserves could reach their worst point in over a decade by year-end. Reuters reported earlier this week that diesel imports into Europe dropped from 1.97 million barrels per day in January to 1.56 million barrels per day in July. The agency noted that diesel prices have continued to rise amid stalled peace talks with Iran and disruptions in Russian exports, bringing them just 14 percent below their April peak. Meanwhile, the Belgian platform Autonext warns that European diesel stocks are approaching the lowest levels recorded since 2015, citing similar assessments from the two major American banks. Davor Štern, a former director at INA and a petroleum analyst, acknowledges the current volatility in diesel prices but emphasizes that Croatia has the capacity to address the crisis. He points out that the Rijeka refinery is capable of producing all the diesel needed domestically. “The government should consider changing its strategy to move away from aligning diesel prices with international market rates,” he says. Instead, he suggests that direct production based on refinery pricing would ensure greater stability and accessibility, particularly for essential sectors like agriculture and fishing. Štern argues that the current system allows for speculative manipulation of prices, with traders seeking to maximize profits. He advocates for a shift in policy that would reduce reliance on volatile international markets. “It would be revolutionary, but feasible,” he notes. If implemented, such a change could represent one of the larger reforms needed to stabilize the economy. He adds that the country requires bold measures, and this could be one of them. In response to concerns about domestic production capabilities, Goran Pleše, director of refining and marketing at INA, announced earlier this month that the Rijeka refinery will increase diesel output by up to 30%. He stated that this expansion would allow the refinery to meet nearly all of Croatia’s domestic demand, significantly reducing dependence on imports. Pleše further confirmed that the refinery is operating at full capacity and has secured sufficient raw materials to maintain production through the upcoming off-season. With these assurances, the company aims to provide reliable fuel supply to both the automotive and agricultural sectors.