U.S. diesel prices have climbed above $6.50 per gallon, while Europe is also facing intense pressure in fuel markets and growing shortage risks. According to OilPrice.com, the main driver is limited global refining capacity, which is unable to quickly offset lost supply from the Middle East and Russia.
Last week, Russia said it would extend its diesel export ban until the end of October. The move comes as Ukrainian drone attacks on Russian refineries continue. The latest such strike, the report said, came on Sunday and targeted one of Russia’s largest refineries.
At the same time, The Wall Street Journal, citing International Energy Agency data, reported that lost diesel output in the Middle East is three times larger than the reduction in Russian supply. That suggests the market squeeze is being driven not only by Russia-related disruptions but also by broader regional losses.
In the United States, calls are growing for a ban on diesel exports. Representative Tim Burchett introduced a bill to that effect last week, and Senate Majority Leader John Thune backed the idea. But Energy Secretary Chris Wright and Interior Secretary Doug Burgum opposed the proposal, arguing that it could ultimately backfire.
Diesel prices feed directly into broader inflation because they affect transport and supply-chain costs. The article notes that higher diesel costs are quickly passed on to food prices, making the issue especially sensitive in Washington ahead of the November midterm elections.
The publication argues that the crisis has been worsened by refinery closures in Europe and the United States over the past decade. Pressure linked to net-zero policies played a role, while some companies converted refining capacity to biofuels production. Alan Gelder, senior vice president for refining, chemicals, and oil markets at Wood Mackenzie, told the paper that major oil companies reduced their exposure to the sector because returns on invested capital had been weak.
While some capacity was leaving the market in Europe and the United States, Middle Eastern petrostates were building new refineries and increasing their share of global refining. But part of that capacity is now also compromised, including Gulf energy infrastructure hit by Iranian strikes, and U.S. refiners are already operating at the highest rates they can sustain, the article said.
Another issue is an idle refinery in Europe owned by Lukoil. It has been offline since the Trump administration imposed sanctions on the company last November, prompting Lukoil to seek a sale of its international business. According to the Financial Times, a deal between Lukoil and Carlyle Group has become stuck in an inter-agency process involving the National Security Council, State Department and Department of Energy.
Carlyle told the Financial Times that Lukoil’s European assets include significant underused refining capacity that could bring more refined products to market and ease fuel price pressure. The likely reference is the Petrotel refinery in Romania, which has been idle since the sanctions took effect. Its capacity is about 50,000 barrels per day. That is not a large volume, but in the current crisis, the article argues, every barrel matters.
Overall, the market still sees no quick solution. Tanker traffic through the Strait of Hormuz remains heavily depressed, attacks on Russian refineries continue, and if the United States imposes a diesel export ban, The Wall Street Journal says China and India could follow suit. That would deepen global fuel shortages further, with Europe likely to remain the biggest loser because of its heavy dependence on imported crude and refined products.
