Will Trump’s deal on Russian diesel lower fuel prices? It’s doubtful

In a last-ditch effort to get some price relief before the midterms, President Trump just struck a deal with Russia’s President Putin to provide 800,000 tons of Russian diesel fuel into American and global markets by the end of November and a few million more shortly thereafter.

Besides the trucking industry, American farmers also consume significant amounts of diesel fuel, which accounts for 44% of direct energy consumption on U.S. farms including, of course, those in South Dakota. You’d expect farmers to be cheered, but this transparently political turnaround from what has been longstanding policies against Russian fuel exports is a gimmick. I doubt that markets will see much of a drop.

Why not? mainly because The amount of diesel released by the Russians isn’t all that much. The first batch of diesel to be shipped out of Russia is 300,000 tons, which equates to about three-quarters of what the U.S. uses in a single day. The next batch released will be 500,000 tons by Novermber, soon followed by a 1 million ton release, then another 3 million tons “shortly after that.”  

It sounds like a lot, but basically, we’re talking about a handful of days’ (maybe a couple of weeks) worth of supply.

Like, wowee.

We just went through this. Trump, as he did with his beef import scheme, comes up with what appears to be a big headline number to make it look like he’s doing something about inflation. Then we learn that the amount isn’t enough to make much of a difference in the market. Beef prices haven’t budged.

The same thing is likely to happen to diesel prices. 

Yahoo Finance calls Trump’s initiative “The Art of the Tiny Deal” and says the amount promised will “do nothing” and that “this is not enough diesel to move the fuel gauge at all, much less lower diesel prices globally, or just the U.S. for that matter.”  

More broadly, on a geo-political scale, Trump looks weak because he had to set aside sanctions against Russia that he signed just a month ago. The president is effectively saying that he didn’t mean to do that.  

Trump’s history of position-shifting, of vacillation, goes on. It’s long-standing and it’s persistent. Politically, it’s his tragic flaw.

Meantime, Americans just keep paying up and paying up.

John Tsitrian is a businessman and writer from the Black Hills. He was a weekly columnist for the Rapid City Journal for 20 years. His articles and commentary have also appeared in The Los Angeles Times, The Denver Post and The Omaha World-Herald. Tsitrian served in the Marines for three years (1966-69), including a 13-month tour of duty as a radioman in Vietnam. Republish with permission.   

Photo: Russian-flagged tanker, public domain, wikimedia commons

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