Refining Capacity Crisis Drives Fuel Price Disparity
Global fuel prices are not moving in lockstep with crude oil due to various factors affecting refining capacity. Geopolitical conflicts, refinery outages, export restrictions, and supply chain disruptions have reduced the world's ability to convert crude oil into usable fuels.
According to Lisa Shidler of RBN Energy, global supply and demand is much tighter in product markets than crude markets. This is the 'overwhelming reason' for the differential trends between crude and product prices.
David Goldman from CNN notes that 'the world no longer has an oil problem, it has a gasoline problem.' He emphasizes the importance of refining capacity in converting crude oil into usable products like asphalt, plastic, heating oil, jet fuel, diesel, and gasoline.
The global refining industry is severely constrained. For instance, refineries processed 5.1 million fewer barrels a day in the second quarter compared to the same period in 2025, according to the IEA. Middle Eastern refiners have been impacted by Strait of Hormuz disruptions and Iranian strikes. Russia's refining capacity has also been knocked offline due to Ukrainian drone attacks.
The International Energy Agency warns that the market for refined petroleum products will continue to tighten. China has restricted exports, and refineries in the Gulf are running far below their norm. At least 10% of global refining capacity is offline, as reported by Bloomberg.