The developing diesel crisis is not simply another rise in the cost of motoring. Diesel is the fuel that keeps the industrial economy moving. It powers lorries, buses, tractors, construction machinery, ships and emergency generators. When its price rises sharply, the cost is carried into almost everything we buy.

The Daily Telegraph reports that international diesel supplies have been severely disrupted. Iran’s blockade of the Strait of Hormuz, the closure of Saudi Arabia’s East-West pipeline and Russia’s restrictions on diesel exports have removed an estimated fifth of global diesel shipments.

European wholesale diesel prices have consequently more than doubled. UK inflation is forecast to rise from 3.1 per cent to 4.3 per cent by February, with diesel alone responsible for about 0.6 percentage points.

These figures reveal something much more important than a temporary fuel shortage. They expose the extraordinary dependence of the modern economy upon plentiful and affordable diesel.

The industrial workhorse

Petrol is principally a fuel for private cars. Diesel performs a much wider economic function.

A farmer needs diesel to cultivate land and harvest crops. A builder needs it to excavate foundations and carry materials. A haulier needs it to deliver food to supermarkets. Local authorities need it to collect refuse and maintain roads. Buses, ambulances and many railway services also depend upon it.

Even goods made without diesel usually travel through several diesel-powered stages before reaching the customer. Raw materials are transported to factories. Finished products are taken to warehouses. They are then carried to shops, businesses and homes.

Diesel is therefore not merely another commodity. It is one of the foundations supporting the complexity of industrial civilisation.

The multiplication of costs

The effect of an increase in diesel prices is cumulative.

A manufacturer may pay more for raw materials because the supplier faces higher transport costs. The manufacturer then pays more to send the finished product to a distributor. The distributor pays more to supply the retailer, and the retailer must pay more for deliveries.

Each business tries to pass on the additional cost. The final customer pays for diesel several times over, hidden within the price of the product.

Businesses with small profit margins cannot necessarily survive this process. Hauliers are particularly exposed because fuel is such a large part of their operating cost. If customers cannot afford higher charges, firms fail. If charges are increased, the prices of food and other essentials rise.

This is how an energy shock spreads through the economy.

Affordability, not simply availability

There does not have to be a complete physical shortage for serious disruption to occur. Diesel may remain available, but at a price that businesses and households cannot afford.

A lorry can still be filled with fuel. The difficulty is that the journey may no longer be financially worthwhile. A distant supplier may still be able to deliver, but its goods may become too expensive for customers.

The first effect will be upon discretionary activity. Holidays, leisure travel, home improvements, restaurant meals and non-essential purchases will be reduced. Businesses serving these markets will lose customers while simultaneously facing higher operating costs.

Essential sectors will not escape. Food, care, public transport and construction must also compete for fuel. Government may try to protect buses and emergency services, but priority arrangements cannot create additional diesel or make it affordable.

Britain has surrendered resilience

Britain is unusually vulnerable because its refining capacity has been allowed to decline.

According to the Telegraph, the number of UK refineries has fallen from nine in 2000 to four today. Imports supplied only 14 per cent of British diesel consumption in 2003. Last year they supplied 54 per cent.

This is another example of apparent efficiency being purchased at the expense of resilience. Importing fuel may have seemed cheaper while international markets were stable. It has left Britain dangerously exposed when shipping routes, wars and foreign governments interrupt supplies.

Globalisation encouraged countries to abandon spare capacity, local production and substantial stocks. Businesses were told to minimise inventories and rely upon just-in-time delivery. That system works only while energy remains affordable and international supply chains operate smoothly.

Efficiency and resilience are not the same thing.

Electric vehicles cannot provide a rapid escape

Some will argue that the crisis proves the need to replace diesel machinery with electric alternatives. Electrification has a useful role, particularly on railways and for vehicles travelling predictable local routes.

It cannot, however, provide an immediate replacement for the immense diesel-powered infrastructure already in use. Millions of lorries, vans, tractors and machines cannot be replaced quickly. Electric alternatives require batteries, minerals, manufacturing capacity, charging equipment and major additions to the electricity network.

These changes also require large amounts of capital at precisely the time when rising energy costs are weakening businesses and public finances.

The claim that one complex industrial system can rapidly be replaced by another may underestimate the scale of the physical task.

A warning of economic shrinkage

The diesel crisis illustrates how economic contraction arrives through repeated losses of affordability.

Transport becomes more expensive. Marginal businesses close. Supply chains shorten because distant trade no longer pays. Some products become scarce, while others remain available but are beyond the means of ordinary households.

Governments may describe each episode as a temporary crisis. Yet every interruption reveals the same underlying weakness: the industrial economy requires enormous quantities of affordable energy merely to maintain its existing complexity.

When the energy cost of sustaining that complexity rises, economic growth becomes progressively harder. More money must be spent on fuel, transport and maintenance. Less remains for investment, public services and discretionary consumption.

The localist response

Localism cannot make every locality self-sufficient, nor can it remove the need for diesel overnight. It can reduce unnecessary dependence upon long and fragile supply chains.

Food produced nearer to its market travels fewer miles. Local workshops can repair products instead of replacing them with imports. Essential goods can be stored locally rather than arriving through continuous just-in-time deliveries. Electrified rail can carry long-distance freight, with shorter local journeys at either end.

Local bus services should receive priority if fuel has to be allocated. One bus can maintain mobility for many people while using far less fuel than the equivalent number of private cars.

Local agriculture will still require machinery, but scarce diesel should be directed towards producing food rather than supporting unnecessary movement. Smaller farms may also rediscover methods that use fewer heavy machines, more repairable equipment and, where practical, human and animal power.

None of this would be effortless. Local production can sometimes cost more in financial terms. But dependence upon distant supplies also carries a cost, which becomes visible only when the system is disrupted.

A glimpse of the future

The world is “freaking out” about diesel because there is no quick substitute for it. Modern economies have been constructed around the assumption that this industrial workhorse will always be available in sufficient quantities and at an affordable price.

That assumption can no longer be taken for granted.

The immediate crisis may eventually ease. New supplies may be found, diplomatic agreements may reopen trade routes, or demand may fall as prices rise. But the vulnerability will remain.

The important question is therefore not simply how Britain can obtain enough diesel to preserve every present activity. It is how the country can ensure that scarce and expensive energy is used for what matters most.

That means protecting food production, essential transport, public services and necessary industry. It also means shortening supply chains, restoring domestic capacity and rebuilding the practical strength of localities.

The diesel crisis is not an isolated inconvenience. It is a warning from the energy foundations of the industrial economy. A society organised around distant production and constant movement becomes dangerously fragile when the fuel that connects everything is no longer cheap.