Diesel desperation is mounting globally

The global diesel market is facing increased challenges due to the Russia-Ukraine war and the Iran crisis, leading to mounting desperation. Diesel prices have risen by 44 cents per gallon in the United States over the past month, reaching $5.32 per gallon, compared to $3.71 a year ago. While the all-time high of $5.82 per gallon was previously recorded in June 2022 during the Iran crisis, it has not been reached since.

S&P Global Energy analysis reveals a significant reduction in global refined product markets, with worldwide refinery processing of 7.5 million barrels per day less crude last month than in 2025. Additionally, an International Energy Agency report highlights a steep drop in crude processing capacity for refineries. The Strait of Hormuz has experienced renewed hostilities, further restricting supply, and Middle East refineries are operating at reduced capacity due to physical impairments or operational challenges.

Russia's diesel export restrictions following Ukrainian drone strikes on refineries have removed 10% of seaborne supplies from the market. China's refinery activity remains subdued as well. In July, diesel exports from Russia, the Middle East, and Asia dropped by 1.3 million barrels per day compared to the previous year, accounting for approximately 20% of global seaborne trade.

The Energy Information Administration predicts retail diesel prices in the United States to average $4.85 per gallon in 2026, up from $4.61 in their previous forecast. Although U.S. refineries are running at 96% capacity, the market's remaining buffers are thin, particularly with the approaching hurricane season and traditional fall maintenance.

Experts warn that diesel shortages could become more severe and costly this winter, especially considering the increase in Ukrainian drone production targeting Russian energy infrastructure. Unless significant peace progress is achieved in both conflicts, substantial amounts of diesel will remain unavailable in the market.