Diesel prices are surging. Ukraine is only part of the story

Diesel prices are on the rise, and Ukraine plays a significant role in this issue. While automobile fuel is primarily used by consumers, diesel powers a vast majority of the global economy, including freight transport, farming equipment, construction, and industry. Consequently, diesel shortages or price hikes can have a more substantial economic impact than gasoline price increases, as they raise the cost of moving goods and operating heavy machinery, leading to higher consumer costs and contributing to inflation.

The United States and China are among the world's top diesel producers. Given that China retains most of its production for domestic use, the United States stands as the largest diesel exporter globally. However, the weekly average price of a gallon of diesel in the US has surged to $6.52 (€5.73), up from $3.74 per gallon a year ago and $3.53 two years ago.

Former President Trump urged Ukraine's president to refrain from targeting oil refineries in Russia, claiming that Russia was causing a diesel shortage. Due to multiple attacks on Russian oil refineries since 2022, approximately 15 times, Russia's diesel production has dropped by nearly 30% compared to 2025 levels. In response, Russia restricted diesel exports to safeguard domestic supplies.

Following this, US President Trump considered a diesel export ban to alleviate domestic prices before the November midterm elections, as energy prices and affordability have become crucial campaign issues. However, energy lobby groups and industry experts doubt the effectiveness of such a ban, fearing it could either fail to lower prices or even result in increased prices or reduced production.

Europe's diesel dependency has severe consequences. Diesel-powered vehicles and businesses are highly vulnerable to oil and fuel price fluctuations. Since the start of the Iran war, EU drivers have paid an average of €30 more for a 50-liter tank of diesel. For German long-haul truck drivers, the increase is even more significant, with an extra €236 per week.

This amounts to €270 million daily, with €203 million being specifically for diesel. In total, EU road transport has faced additional costs of €40 billion due to diesel since the beginning of the war. In the short term, Russia's crude oil processing volumes are the most rapidly changing factor affecting diesel prices. Each wave of Ukrainian strikes manifests in diesel prices within days, unlike the Hormuz Strait, which has been experiencing a depressed but relatively stable flow rate for months.

Refining capacity is now the most critical constraint, as both the Ukrainian drone campaign and the Hormuz conflict have rapidly disabled working refining capacity, faster than it can be replaced.