Are we on the brink of an energy war?

European energy ministers are meeting this morning as a standoff between the block and the United States over diesel prices deepens. Earlier in the week, Reuters reported that the Trump administration had urged Germany and France to release their emergency diesel stocks in a bid to ease supply issues or else face a US diesel export ban. And across the Pacific, Reuters is reporting that China's refiners have halted exports of oil products as it looks to protect its domestic supply. So, are we edging closer to an energy war? Well, this comes as diesel prices across the United States have hit a record high soaring to six bucks and 52 cents on September 23rd. That is up 76% from a year ago. Now, that makes the fuel more expensive than it was during the early days of Russia's invasion of Ukraine, even though crude oil prices were actually higher back then. This time the story isn't actually about crude prices. It's about refineries and lack of refinery capability caused by damage to refineries from the conflict in Ukraine and of course the one in the Middle East. As the world's top diesel exporter, a US squeeze would have far-reaching consequences. South America would be hit the hardest, but Europe would be right behind. The impact from soaring crack spreads is already being felt. European drivers are now paying 40% more than at the start of the year according to a report from NGO Transport and Environment. And Europe is the world's most exposed region to higher diesel prices with the refined product accounting for 40% of its petroleum consumption. So, what next? Well, there doesn't seem to be an early easy fix. Goldman Sachs says effects of a US export ban could raise European wholesale prices by just under 2% each week.