Diesel prices in Germany now hinge on the Houthi mood each morning

The surge in diesel prices in Germany, which rose by about 20 cents last Saturday at midday, is due to instability in the Bab el-Mandeb strait, vital for maritime trade. Oil companies are anticipating higher transport costs in the face of the threat of rerouting.

## Tension in the Bab el-Mandeb strait sends diesel prices soaring

Diesel prices in Germany have taken a notable leap, reaching about **€2.56** per litre on average at midday last Saturday. That meant an increase of about **20 cents** compared with the hours before. The main cause of this sudden rise is attributed to the actions of the Houthi militia in the **Bab el-Mandeb** strait, a crucial shipping route connecting Europe and Asia. The Houthis are threatening a blockade, which is prompting oil companies to react immediately, factoring a possible future rise in crude prices into current prices, even before it shows up on the markets.

## The impact on maritime trade

The **Bab el-Mandeb** strait, located between Yemen and the African continent, is a key chokepoint for global shipping. It is estimated that in **2023** almost **9%** of total trade passed through this route. The Houthis' strategic positioning along the strait raises the possibility of massive route diversions. That would miccionan sailing around the African continent via the Cape of Good Hope, a considerably longer and more expensive journey. Although it has not yet come to that, the market is already pricing in these future increases in transport costs and other associated expenses.

## When to fill up to save money?

Given this situation, the question arises as to whether it is better to fill the tank now or wait. Some forecasts suggest the price per litre of fuel could reach **€3** due to naval blockades and the resulting demand for biodiesel. However, there is a strategy to try to soften the impact of these increases. Since April, petrol stations in Germany may only change their prices once a day, specifically at midday. Therefore, filling up **before 11:00 or 12:00** at midday usually means lower prices. Last Saturday, for example, the price of diesel remained high even at 1 pm, showing how quickly these tensions are passed on at the pump.