Why Record Crude Output Can’t Solve America’s Diesel Crisis

The United States is currently producing more crude oil than ever before, with the Energy Information Administration projecting a record 13.8 million barrels per day by 2026. However, this surge in production does not appear to be alleviating the high diesel prices and low distillate inventories. In fact, distillate inventories are expected to remain below the five-year average through much of 2027, even dipping below 100 million barrels for the first time in over two decades.

The contradiction lies in the fact that crude oil and diesel are not the same commodities. Crude oil must undergo a refining process before it becomes diesel, gasoline, jet fuel, heating oil, or other petroleum products. A record amount of crude oil can be produced while still facing tight refined-product markets, as the bottleneck may lie after the oil has been extracted.

One major misconception is that refiners can simply adjust production based on market demand for gasoline or diesel. While there is some flexibility, it is limited by factors such as chemistry, crude quality, refinery configuration, and available equipment. A typical 42-gallon barrel of crude processed in a U.S. refinery generates roughly 19 to 20 gallons of gasoline and 11 to 13 gallons of ultra-low-sulfur distillate, most of which becomes diesel or heating oil.

The remaining products include jet fuel, petrochemical feedstocks, asphalt, petroleum coke, and others.

Refiners are operating near full capacity, with U.S. refineries reportedly running at an average of 96% capacity during the third quarter. Diesel crack spreads, which measure the difference between diesel and crude oil prices, reached unprecedented levels due to global product shortages. However, refineries cannot maintain such high utilization rates indefinitely due to maintenance requirements and traditional refinery turnaround seasons in the fall.

The U.S. refining capacity has also decreased slightly, with operable atmospheric crude-distillation capacity standing at about 18.2 million barrels per day in early 2026, a reduction of roughly 250,000 barrels per day from the previous year. This shortfall, combined with disruptions in major oil-producing regions due to conflicts and reduced European refining capacity, has further tightened diesel availability.

As major suppliers face constraints, competition for available barrels increases, putting upward pressure on prices worldwide.