Cost increases will persist after Brussels cut off key Russian-linked supply routes, the CEO of TotalEnergies has warned

The latest European Union sanctions banning imports of oil products made from Russian crude are driving up diesel prices worldwide, according to the head of TotalEnergies, Europe's largest oil refiner.

The EU introduced its 18th package of Ukraine-related sanctions last week, barring imports of oil products derived from Russian crude, even if refined outside the bloc. It also lowered the price cap on Russian oil to $47.60 and sanctioned over 100 vessels in what Brussels claims is a "shadow fleet" transporting Russian oil and circumventing restrictions.

European diesel futures have spiked in recent weeks, at times hitting the equivalent of $110 a barrel, as traders turn to alternative suppliers following the EU ban, TotalEnergies CEO Patrick Pouyanne said during the company's Q2 earnings call on Thursday.

"We think stronger diesel prices will become a persistent feature on the global market," Pouyanne stated, as quoted by Bloomberg. "Diesel now comes from the Middle East or US refineries further away, which raises costs."

He added that banning fuels made from Russian crude at foreign refineries has further tightened supply. The EU also sanctioned India's Vadinar refinery, part-owned by Russia's Rosneft, which had been a major supplier of refined Russian crude to the EU.

"People have underestimated this news from the EU," Pouyanne said. "There is something, for me, more structural there," he warned.

The CEO noted that the pivot from Russian supplies has led refineries to rely on lighter crude, which yields less diesel. Many EU plants have replaced Russia's Urals grade with lighter US barrels, complicating diesel output.

The latest ban builds on earlier 2022-2023 sanctions that restricted direct imports of Russian crude and fuels. Economists have warned the move could backfire, as the bloc remains structurally short of diesel and heavily reliant on Russia, one of its top external suppliers. Diesel powers large parts of the EU economy, with over a third previously sourced from Russia.

Russia has called the sanctions illegal, branding them a "double-edged sword" and warning that each new round worsens the impact on countries endorsing them.

(RT.com)