US Demands France and Germany Release Diesel Reserves or Face Embargo

The US government has informed Germany and France to release emergency diesel reserves to lower global oil prices, or they may face a US diesel export ban, according to Reuters citing three sources close to the discussions.

The US is dissatisfied with France and Germany, believing that the two countries have not fulfilled their commitments made earlier this year during the International Energy Agency's coordinated release of oil reserves, which was intended to offset supply disruptions related to the war with Iran. Officials have raised concerns with the International Energy Agency. The EU did not immediately respond to claims of "members not fulfilling commitments."

The inventory structure is concentrated in the two countries. The latest available data from the EU for May 2025 shows emergency diesel and gasoline stocks of about 39 million tons, with Germany holding 5.6 million tons and France 8.2 million tons, together accounting for about 35% of the EU's strategic reserves. EU rules require member states to maintain emergency oil stocks equivalent to at least 90 days of net imports or 61 days of domestic consumption, whichever is higher.

In March, the International Energy Agency agreed to a global release of about 400 million barrels, with the US contributing 172 million barrels and EU countries committing to supply 20% of the total. EU Energy Commissioner Dan Jorgensen stated that he has discussed additional releases with IEA Director-General Fatih Birol, but it has not yet been decided whether to ask member states to release more. Energy Minister Chris Wright publicly stated that the US and Japan are fulfilling their commitments, while several European member states have only released a small portion of their promised crude and refined oil.

Diesel prices have risen to record or near-record levels in several markets, including Europe. The average price from the American Automobile Association reached $6.5107 per gallon. US diesel exports hit a record in August, reaching 1.6 million barrels per day, compared to about 1 million barrels per day before the war with Iran in February; buyers include Brazil, Chile, Mexico, Peru, Morocco, France, and the UK. Kpler reported that last month, the US supplied 420,000 barrels per day to the EU and the UK, accounting for more than half of the imports for that month.

From a market mechanism perspective, this is a policy pressure driven by oil prices ahead of elections, rather than spot trading. The buyer is the US government, aiming to reduce fuel costs for farms, trucks, and manufacturing, while the sellers are France and Germany, being asked to tap into their emergency reserves. If the embargo is implemented, US refined oil exports would be curtailed, widening the net import gap for Europe, while diesel from the Middle East through the Strait of Hormuz and the Red Sea has already been disrupted by the war. Beneficiaries would be domestic diesel buyers in the US, while European importers reliant on US diesel would be under pressure, along with US refineries that may be forced to cut production.

Source: Public Information