Global Diesel Squeeze: Refining Disruptions Send Prices Soaring

The global diesel market is facing a significant squeeze, with prices reaching near-record highs. The U.S. average price of diesel hit $5.58 per gallon last week, close to its all-time record.

The divergence between crude oil and diesel prices can be attributed to disruptions in the refining process. Crude oil, the raw ingredient for diesel production, is being processed at a reduced rate due to damage from drone strikes and disrupted shipping through the Strait of Hormuz.

Russia, one of the world's largest diesel suppliers, stopped exporting earlier this year after Ukrainian strikes shut down several of its refineries. China, another major supplier, curtailed fuel exports to preserve domestic supply.

The combined disruptions have resulted in a 10% reduction in global fuel-making capacity, with U.S. refineries running at record rates to meet demand. However, these high utilization rates mean that refineries are unable to increase fuel production further.