NEW DELHI, Sept. 22
Global diesel supplies are under growing pressure as refinery disruptions, wars in West Asia and Ukraine and historically low inventories leave the market with little capacity to absorb another supply shock, raising the prospect of elevated fuel prices well into 2027.
The problem is increasingly one of refining rather than crude availability. Damage and disruption affecting refineries in West Asia and Russia, restrictions on shipping through the Strait of Hormuz and reduced Chinese fuel exports have limited the amount of crude being converted into diesel and other refined products. Reuters reported that the shortage is unlikely to ease substantially before next year.
The strain is particularly visible in the United States. Diesel inventories stood at 107.9 million barrels on September 11, their lowest level for that point in the year since records began in 1982. The US Energy Information Administration expects distillate stocks, which include diesel, to fall below 100 million barrels in September and remain below the five-year low through the end of 2026 and for much of 2027.
An unusual development in the storage market illustrates the depth of the shortage. Diesel storage capacity available for lease across North America and the Caribbean is expected to reach 13 million barrels in October, compared with 11 million barrels in June, according to storage broker The Tank Tiger.
The additional available capacity does not mean fuel stocks are recovering. Storage operators told Reuters that refiners and traders are allowing leases to expire because they have less diesel available to store.
The shortage extends well beyond the United States. Diesel inventories at the Amsterdam-Rotterdam-Antwerp trading and storage hub were 16 per cent below their five-year average in July. Singapore’s distillate stocks have recently averaged about 8.2 million barrels, down from an average of 9.6 million barrels in 2025.
Behind those numbers lies a broader disruption to the global refining system.
The American Petroleum Institute estimated in an August analysis that disruptions across West Asia, Russia and China had removed about five million barrels a day of crude-processing capacity compared with a year earlier, equivalent to almost 10 per cent of global supply.
West Asia has emerged as one of the pressure points. Refinery damage, combined with disruption to shipping through the Strait of Hormuz, has reduced the volume of refined fuels reaching international markets.
Russia, traditionally an important supplier of diesel, has faced a different problem. Ukrainian attacks on Russian energy infrastructure have affected refinery operations, restricting another important source of supply. China has added to the pressure after limiting refined-fuel exports earlier in the year to protect its domestic market, although exports have subsequently begun increasing.
Finding additional supply quickly will be difficult.
US refiners are already running close to maximum capacity. The American Petroleum Institute said utilisation reached 97 per cent in July, with refineries producing more diesel than in any previous July. S&P Global reported an even higher utilisation rate of 97.4 per cent during the week ending August 21, the highest in nearly eight years.
That leaves American refiners with limited room to increase output if inventories fall further or another international supply disruption occurs.
The shortage has driven refining margins sharply higher. The US Gulf Coast diesel crack against West Texas Intermediate crude reached $91.06 a barrel on August 25, according to S&P Global, compared with about $30 a barrel a year earlier.
Estimates of the global supply loss vary. Analysts cited by S&P Global put the shortfall in refined products at between two million and three million barrels a day, while the International Energy Agency estimated lost refining throughput at 4.7 million barrels a day compared with 2025.
Restoring lost capacity is unlikely to provide a quick answer. Restarting idled refineries can be difficult and expensive, while constructing new refining capacity takes years. That leaves governments and fuel suppliers with relatively few immediate options if the shortage worsens.
Consumers and businesses are already feeling the effect.
US retail diesel prices crossed $6 a gallon this month for the first time, according to Reuters. The US diesel crack spread reached a record $118.62 a barrel on September 14, reflecting the growing premium attached to turning crude into diesel.
Britain has faced similarly sharp increases. Average UK diesel prices have risen 54 per cent since the West Asia crisis began in late February, reaching 196.28 pence a litre, according to figures reported by The Guardian. Prices were expected to reach £2 a litre within days, with some filling stations already selling above that level.
Britain is particularly exposed because its domestic refining base has contracted substantially. The number of operating refineries has fallen from nine at the beginning of the century to four, leaving the country dependent on imports for 54 per cent of its diesel consumption last year.
The economic implications extend beyond motorists. Diesel remains central to road freight, agriculture, construction and industrial activity. A prolonged increase in fuel costs raises transport and production expenses, which can eventually feed through into the prices of goods.
There are some possible sources of relief. China’s refined-fuel exports have started increasing again, while unusually high refining margins provide a strong commercial incentive for producers with spare capacity to increase output.
But the central weakness remains the lack of spare refining capacity. With American refineries already operating near their limits and inventories unusually low across several major markets, there is little buffer against another disruption.
Any further escalation in the US-Iran conflict, continuing attacks affecting Russian refining capacity or an unexpected outage at a major refinery could tighten supplies further.
The present diesel squeeze is therefore different from a conventional oil shortage. Crude may still be available, but the global system has less capacity to turn it into the fuels required by trucks, farms, factories and consumers.
Until that refining constraint eases, the diesel market is likely to remain vulnerable, with low inventories leaving little margin for another shock.
