A potential catastrophe for Britain is festering in the cornfields of Kansas.
This sparsely-populated, far-away prairie state in America’s mid-west hasn’t elected a Democratic senator since a landslide swept Franklin Delano Roosevelt into the White House in 1932, heralding the start of the New Deal to tackle the Great Depression which followed the 1929 Wall Street Crash.
Donald Trump easily won Kansas all three times he ran for president, with victory margins of between 15 and 20 percentage points.
A Republican won the last race for a Senate seat (in 2022) by 23 points.
The state’s other Senate seat is up for grabs in November’s mid-term elections. This time it couldn’t look more different: In the latest polls the Republican is a mere 1.5 points ahead.
Now, the chances are the Republicans will still hold the seat. But if it’s a close contest in Kansas you can be sure the Republicans are in real trouble in much more marginal mid-west states like Ohio, Iowa and Michigan.
Lose these states plus a few other toss-ups and the Republicans will lose the House and the Senate, relegating Trump to lame-duck status in the final two years of his presidency. The Democrats will have a field day.
What’s this got to do with the price of diesel at the pump on a British forecourt? Rather a lot, I’m afraid.
Since Trump launched his war on Iran almost seven months ago the cost of a gallon of diesel has soared 70 per cent to over $6.50, the highest price on record, writes Andrew Neil
The states Trump is most at risk of losing are big in farming, construction and road haulage. All major users of diesel – the lifeblood of their economies.
Since Trump launched his war on Iran almost seven months ago the cost of a gallon of diesel has soared 70 per cent to over $6.50, the highest price on record.
A war that was never popular from the start is now more unpopular than ever, even in Republican heartlands.
So some Republicans have been urging Trump to ban US exports of diesel and flood the home market instead, putting downward pressure on diesel prices.
America is the biggest exporter of diesel in the world (exporting 1.5million barrels a day), so a ban could certainly free up a lot of diesel for domestic pumps.
Most energy experts don’t think it would depress diesel prices by anything like what the Republicans claim. But Trump, increasingly desperate about the mid-terms and short of other options, has been saying he’s minded to do it. The consequences for Europe – and especially Britain – would be disastrous.
The UK now imports 55 per cent of its diesel. Like many American swing states, much of our economy – farm equipment, construction machinery, long-distance lorries, short-distance vans – runs on it. It is more important to business than petrol. Fewer than 20 years ago, British refineries produced 85 per cent of the diesel we needed.
But a generation of Labour, Tory and Liberal Democrat politicians, blinded by their obsession with a green agenda – and especially Net Zero – allowed five major refineries to be closed, leaving only four today (and one of them – which just happens to be the biggest – is currently out of operation pending renovation).
Hence the steady rise in imported diesel – a third of which now comes from America, making us especially vulnerable to a US export ban. But it’s worse than that.
Chancellor John Healey claims, incredibly, that ‘we’ve got the [diesel] stocks we need’. He’s ignorant of the truth, very badly briefed by his people or lying. As the politicians closed our refineries – even as they wanged on about reindustrialising the country (while doing the opposite) – they also scuppered our storage capacity.
Germany, France and Italy have 900 days-worth of stored diesel between them. Japan alone has 1,000 days. We have 42 days. That’s it.
We have not only made ourselves increasingly dependent on imports, especially from America, which we knew was risky – extended supply lines always are.
But also, instead of improving our resilience by building up more reserves, we cut our diesel storage capacity to under six weeks’ worth. No wonder we increasingly resemble a failed state. Yesterday, diesel prices at the UK pump tipped over £2 a litre for the first time ever. It now costs over £110 to fill up the average family car, £32 more than at the start of the year.
The UK now imports 55 per cent of its diesel. Fewer than 20 years ago, British refineries produced 85 per cent of the diesel we needed
These are the makings of a new cost of living crisis to come. And not just at the pump. Household fuel bills are set to shoot up again in January. Taken together, they add up to some real pain in store for ordinary families.
We will have the trigger-happy man in the White House to thank for much of it, given its impact on oil and gas prices. A Trump diesel export ban would add to the pain. The toll on business and companies, big and small, would be especially high. It could easily throw us into recession by early next year.
We don’t yet know if Trump will plump for an export ban. Senior figures in his administration have been urging him instead to demand Europe releases some of its diesel reserves as an alternative to a ban. The argument is this would still nudge prices down.
And yesterday the G7 club of major market economies agreed to release 100million barrels of oil from its combined stockpiles, of which Europe’s contribution would be 50million barrels of diesel, front-loaded for release over the next 20 days or so. Trump hailed this as ‘a massive amount’. Wholesale diesel prices dipped.
In reality, it amounts to two days-worth of global diesel consumption. So the impact on diesel prices is likely to be very limited, especially since China announced earlier this week that it’s suspending exports of diesel and jet fuel.
When it dawns on Trump that diesel is still over $6.50 a gallon and rising in places like Kansas, despite his G7 deal, I expect he’ll soon be banging the drum again for an export ban.
The G7 deal is meant to rule out export bans. But we know Trump can turn on a dime. Britain should brace itself for that. We were marginal participants in the G7 agreement because we have almost no diesel or oil stockpiles to contribute.
Government needs to proceed on the basis that diesel will be in short supply for the foreseeable future, even without a full US export ban, even with this new G7 initiative.
Britain used to import diesel from Russia. The Ukraine war put a stop to that.
Even if we were willing to endure the opprobrium of buying again from Russia, we couldn’t.
Ukrainian drones have taken out a third of Russia’s refining capacity. Russia is now an importer of diesel, largely from India. The Gulf states were also major suppliers of diesel – until Trump’s war put the kibosh on that, too.
We head into the winter with rising diesel prices still adding to the general rise in inflation which, in turn, will lead to higher interest rates, higher mortgages and even higher borrowing costs for heavily indebted governments, like ours.
Economic growth will falter, reducing government tax revenues which are already stretched. Businesses will struggle to cope with rising costs. Some will cut back. Others will go under.
It is a grim prospect, which our government is spectacularly ill-equipped to deal with. There was nary a word about any of this at Labour’s Liverpool love-in – or since. Even the Prime Minister and the Chancellor were too busy wallowing in pitiful Left-wing nostalgia for a better yesterday to address the looming winter of trials and tribulations.
The PM has had more to say about the scandal swirling round Manchester City, none of it helpful, than about the
record interest rates on government borrowing.
It is remarkable that the government is making no preparations for rough, tough times ahead. No attempt to prepare the people, no steps to improve our resilience in the face of multiple threats. Just talk of rejoining the European Union, electoral reform, more welfare, more spending, more unfunded nonsense.
It amounts to a dereliction of duty. As the Burnham government is about to find out the hard way. Its rendezvous with reality is coming – and sooner rather than later.
When it does, ministers from the PM down will have no idea what’s hit them. We should all be afraid.