While just one of many costs in a mining operation, diesel fuel is an essential item, especially in big open pit mines which rely on heavy earthmoving equipment, and the diesel-electric locomotives which haul material to port.

A whiff of what's happening on the cost side of some mining operations was revealed in the latest quarterly report of Australian iron ore miner Fortescue Metals Group.

Though still hugely profitable thanks to iron ore trading at more than US$120 a tonne in the three months to Christmas the accounting item in the quarterly which caught the eye of analysts was a 20% increase in costs per tonne of ore mined.

Itemised in management comments was the cause of the steep quarterly increase with diesel fuel getting first mention, followed by higher labour costs and other consumables.

Diesel is highly likely to feature again in the next Fortescue quarterly, and should also be broken out by all mining companies because not only is it soaring in price, but there's a risk of supplies drying up with a severe effect on mining operations.

Anyone fueling a car with diesel in Britain knows what's happening to the price of the fuel which has risen by close to 30% since Christmas. In Australia, the average diesel price has risen faster, up 35% since the start of 2022.

Miners have been able to offset higher fuel prices by selling minerals and metals into strong commodity markets which have seen some material trade at all-time highs. Copper, for example, is selling for $4.72 a pound, double the price of two years ago, and iron ore has moved back up to $142 a tonne.

Record breaking prices could continue for the rest of the year as global markets adjust to sanctions on Russian minerals with occasional spectacular break-outs such as the short-squeeze which briefly drove nickel to more than $100,000/t.

But closely tracking the metal boom are sharply higher costs, especially for liquid fuels and they're likely to become a permanent feature of operations, even after commodity prices contract.

Oil and gas, Russia's two biggest exports, are facing ever tightening sanctions which threatens to spark an economic shock to rival the oil shocks of the 1970s with diesel the "canary" in the costs mine.

A series of reports this week highlighted the tightening cost squeeze with the New York-based commodities research house Goehring & Rozencwajg reinforcing earlier forecasts of a dramatically higher oil price caused largely by a lack of investment in exploration and project development.

The upshot of under-investment is an oil price heading for $150/bbl, with $200/bbl possible.

"Natural gas prices reached $300 per oil-equivalent barrel in the December quarter," the firm said in its latest newsletter which also criticised other energy price forecasters for misreading what's been happening in energy.

What sky-high prices for oil mean to diesel, and hence to mining costs, was a feature of energy industry leaders at the Financial Times Commodities Global Summit held this week in the Swiss city of Lausanne.

According to an FT report from its conference Europe was most at risk of a systemic diesel shortage as a result of sanctions on Russia with possible rationing of the fuel.

Russell Hardy chief executive of Vitol, a Switzerland-based oil trading company, said Europe imports half its diesel from Russia and half from the Middle East with a shift to away from petrol to diesel helping create a shortage.

Torbjorn Tornqvist, co-founder of Gunvor, another commodity trader, add that: "diesel is not just a European problem. This is a global problem. It really is".

If Australian mining companies are feeling the diesel squeeze it could be worse in another major mining jurisdiction, South Africa, were competition is developing between miners and the State-owned power utility, Eskom.

Last week, Eskom reported that about one-third of its coal-fired electricity capacity was unavailable at any one time as operator struggled to keep up with equipment maintenance, meaning that Eskom has been forced to fall back on diesel generators at an additional cost of $1.4 billion over the next 13 months.

For mining companies, the diesel shortage is not yet an existential crisis, but the longer the shortage lasts the more damage it will do to profits and the survivability of remote mines which can't operate without diesel.