Diesel Prices Hit Record High Amid Global Refining Crunch
U.S. diesel prices have hit another record high, topping $6.50 per gallon last week, as fuel shortages loom over already struggling economies in Europe. The problem is not just a lack of oil supply but also inadequate refining capacity to process it.
The loss of Middle Eastern and Russian barrels has pushed the global market into a crunch, with diesel output from the region being three times higher than lost Russian supply, according to the International Energy Agency.
As a result, there are calls in Congress for a U.S. ban on diesel exports, which could bring down prices at home but push them even higher elsewhere. However, this would be a short-term fix that could ultimately backfire, exacerbating the fuel supply crisis.
The refining capacity shortage is partly due to the shutdown of refineries under pressure from the net-zero movement, mainly in Europe and the U.S. under Democratic administrations. Middle Eastern petrostates built new refineries to meet their domestic needs, but these facilities have been compromised by Iranian strikes on Gulf energy infrastructure.
One European refinery remains idle due to sanctions on its owner, Russia's Lukoil, leaving a significant portion of its capacity unused and unable to contribute to the global supply. With no quick fix in sight, fuel prices are likely to continue rising, affecting not just diesel but also other refined products like jet fuel.