Global Fuel Prices: Refined Products in Short Supply Despite Crude Oil Price Decline

Global fuel prices are not moving in lockstep with crude oil due to a complex interplay of factors, according to experts. Geopolitical conflicts, refinery outages, export restrictions, and supply chain disruptions have reduced the world's ability to convert crude oil into usable fuels.

The global refining capacity is constrained, largely due to the war in Ukraine, which has damaged Russian energy facilities and disrupted the Strait of Hormuz, a major shipping lane. This has resulted in a shortage of refined products such as diesel and gasoline, even as global consumer demand remains strong.

Experts point out that what matters most to consumers is the price of refined fuels, not just the price of crude oil. The International Energy Agency (IEA) warned that the market for refined petroleum products will continue to tighten due to factors outside of control, including Ukraine's drone attacks on Russian refineries and China's export restrictions.

The global refining capacity has been severely curtailed, with at least 10% of total capacity offline. This has led to a shortage of diesel, which is essential for transportation and industry. The Middle East may have reopened, but Russia, one of the world's largest diesel suppliers, continues to lose refining capacity.