A US ban on diesel exports could push British inflation to nearly 5 per cent, economists warned, after average pump prices topped 2 pounds per litre ($2.7) for the first time
NEW DELHI — A US ban on diesel exports could push British inflation to nearly 5 per cent, economists warned, after average pump prices topped 2 pounds per litre ($2.7) for the first time.
Forecasters said a prolonged ban could push prices to 3 pounds and add as much as one percentage point to UK inflation, strengthening the case for Bank of England interest-rate hikes, according to multiple reports.
The warnings followed reports that Group of Seven countries (G7) plan to release up to 100 million barrels of diesel and oil over the next four months to ease market strains, sending European diesel and Brent crude futures lower.
The US administration has indicated the possibility of an export ban unless European nations release stockpiles to control prices. An export ban would hit the UK hard because of its heavy reliance on imports, the reports said.
British motoring organisation the RAC was quoted as saying that average diesel prices crossed 2 pounds per litre for the first time, meaning filling up a 55-litre tank would cost 32 pounds more than before the Middle East conflict began.
Disruption to diesel supply could be problematic as demand from trains and trucks is unlikely to fall enough in response to supply.
Thomas Pugh, chief economist at RSM UK, said a prolonged US diesel ban could push UK inflation by 0.5 per cent, which includes indirect effects from a price surge filtering down supply chains to consumers rapidly.
Pugh said the UK would find it hard to adjust to losing 20 per cent of diesel overnight especially as “diesel is used in all industry and trucking,” adding that firms couldn’t help passing that through to the customer.
Consumers and businesses are set to face a dire scenario in the coming winter, with gas and electricity bills forecast to surge in January 2027 and push inflation above 4 per cent.
BOE officials also fear the supersized El Niño could lead to a fresh wave of food inflation if it disrupts global weather patterns and harvests of key crops.