The French government has decided not to rebuild strategic diesel reserves after releasing 10 million barrels from these reserves. This decision was made following Prime Minister Sébastien Lecornu's announcement on October 7 regarding the release of reserves amounting to 10 million barrels starting November 1.
Release of Reserves and Its Impact on Prices
With the release of these reserves, diesel distributors will be able to purchase this fuel at an average price of 28 cents per liter. This price is significantly lower than current market prices and could help reduce prices at pumps by 12 to 18 cents per liter. The first legal basis for this action was established in a decree published on Saturday.
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Challenges of Rebuilding Reserves
Although Lecornu had stated that "operations should rebuild reserves within a year," after consulting with relevant companies, it was decided that the reserves would not be rebuilt. This requirement was accompanied by many challenges, as in the event of continued geopolitical tensions and high market prices, distributors would have to repurchase these reserves at high prices.
Moreover, diesel consumption in France has been steadily declining as people have limited their expenses and turned to electric or gasoline vehicles. This trend has accelerated this year, leading the government and industry to conclude that rebuilding reserves is no longer so essential.
Philippe Cassez, head of the French Oil Industry Union (Ufip-EM), stated: “We are forecasting what may happen in the next two or three years.” According to government statistics, these 10 million barrels represent one-fifth of the country’s strategic diesel reserves, which are intended to supply three months of the country's consumption.
The decision not to rebuild reserves will lead to a decree that changes the storage requirements for fuel sellers. Another distributor also commented: “This may be the best solution” and added that rebuilding reserves at 28 cents per liter would be very difficult.
He also added: “This does not seem to pose a risk to our energy independence.” Meanwhile, the Matignon offices and the Ministry of Energy refrained from providing any comments on this matter.
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