Seven months into the conflict in the Middle East, surging fuel prices at the pump—particularly for diesel—are triggering widespread alarm among motorists and public authorities from Cleveland to Rouen.
Strait of Hormuz Disruptions Constrain Refined Export Flows
Crude oil flows are improving, but the transport of refined products through the Strait of Hormuz remains sluggish due to complex logistics. George Shaw, an analyst at the commodities analytics firm Kpler, notes that because fewer products can leave the region, certain refineries are cutting production speeds to prevent inventory saturation. This drop in export volumes is compounded by facilities damaged during Iranian strikes in the Middle East, a region that accounted for one-tenth of global refining capacity in 2025, according to OPEC data.
Ukrainian Drone Strikes Deepen Russian Gazole Restrictions
In Russia, Ukrainian drone attacks on refineries have driven utilization rates down to their lowest levels in two decades, based on Kpler assessments. Moscow has also extended its suspension of gazole exports through the end of October. Although European Union nations banned direct imports of Russian diesel in 2023, traditional buyers like Turkey and Brazil have shifted to alternative suppliers, intensifying global market pressures.
Aging American Refineries Push Output to the Limit
To fill the supply gap, U.S. refineries are running at maximum capacity, creating operational vulnerabilities. Samantha Dart, co-head of commodities research at Goldman Sachs, points out that much of this infrastructure is aging, meaning that pushing facilities to their limits frequently triggers unplanned outages. Europe has leaned more heavily on American diesel during the crisis, raising concerns over reliance on U.S. policy decisions. Nitin Jindal, global commodities head at Goldman Sachs, warns that a general U.S. ban on diesel exports would spark intense global competition for alternative supplies, driving up international energy market volatility.
China Export Quotas Create Global Market Uncertainty
China holds the world’s largest pool of unused refining capacity, according to Ben Cahill, energy center director at the University of Texas at Austin. However, abrupt government adjustments to export quotas—such as those implemented in March—create ongoing uncertainty for the global market and Asian consumers alike. Overall, the International Energy Agency (IEA) reported that global refinery activity dropped by 4 million barrels per day in August compared to the previous year.
Europe Suffers from Structural Diesel Production Deficits
Diesel is difficult to substitute in the short term because it sustains key economic sectors, including agriculture, mining, and road freight. Tatiana Mitrova, a researcher at the Columbia Global Energy Center, emphasizes that peak demand tied to harvests and the heating season further complicates energy planning. Europe also suffers from a structural deficit in diesel production. Francis Perrin, research director at IRIS, explains that French and European refineries were originally built to maximize gasoline output, leaving an aging asset base unsuited to decades of societal “dieselization.” BNP Paribas experts note that European refining capacity has steadily eroded since 2000, shrinking its share of global capacity from 22% to 14% due to declining domestic oil consumption, strict regulations, and high operating costs.
High Refiner Margins Prompt Calls for Windfall Taxes
Refiners’ gross margins have surged alongside high crude prices and benchmark Rotterdam quotations, prompting calls from some politicians for windfall taxes. TotalEnergies argues that refining is an energy-intensive, costly business requiring massive annual investments. Company representatives note that the sector operated at a deficit in Europe for years while firms continued investing to maintain units capable of responding to the current crisis.
Macron Requests Relaxed Regulations to Boost Fuel Production
In response to the crunch, French President Emmanuel Macron wrote to Brussels requesting relaxed regulations on diesel and jet fuel refining to boost production by 5 to 20 percent. Philippe Casbas, president of the Ufip Energies and Mobilités trade organization, states that French refineries have already supplied about 10 percent more diesel than usual since the crisis began, though operational adjustments remain constrained. George Shaw estimates that even if the conflict ended immediately, refined product prices would be the last to normalize due to damaged infrastructure and severely depleted inventories. Goldman Sachs projects that diesel refining margins will remain roughly 50 percent above normal through 2027.
Strategic Product Reserves and NATO Warnings
Tatiana Mitrova advocates for establishing dedicated petroleum product reserves alongside traditional strategic crude stocks, arguing that Europe’s sweeping refinery closures under environmental policies have left the continent dangerously dependent on imports. NATO Secretary General Mark Rutte highlighted those security risks in a Bloomberg interview, warning that Europe will need massive quantities of diesel and other petroleum products to fuel F-35 fighter jets and tanks in a conflict, making ongoing refinery closures deeply concerning. The IEA forecasts that Europe will remain one of the regions hardest hit by capacity closures through 2030.
