Key facts
- Global fuel stocks are at historic lows.
- China and Russia have implemented diesel export bans.
- Diesel crack spreads reached over $100 per barrel in September.
- The U.S. national average diesel price was $6.3151 per gallon as of Tuesday.
- Europe is highly dependent on imported fuel and faces a severe diesel shortage.
- Energy security has become the top priority for most countries, surpassing decarbonization.
Global fuel supplies are critically constrained, leading to a surge in energy nationalism as countries prioritize domestic needs. China has banned all fuel exports for the month, while Russia maintains a months-long diesel export ban. The United States considered a similar ban to combat rising prices, threatening Europe if it did not release fuel from storage.
Analysts warned in April that the conflict in the Middle East would impact fuel supply more than crude oil. This prediction has materialized, with diesel crack spreads reaching an all-time high of over $100 per barrel in September. Insufficient refinery capacity to compensate for lost Middle Eastern supply and ongoing Ukrainian attacks on Russian refineries have exacerbated the situation.
The U.S. ultimately abandoned the idea of a diesel ban after President Donald Trump pressured European Union countries to release 100 million barrels of crude, diesel, and gasoline from storage. This action contributed to a decline in diesel crack spreads and a slight decrease in prices, with the U.S. national average at $6.3151 per gallon as of Tuesday.
Europe, however, faces a more dire situation due to its heavy reliance on imported fuel. With fewer refineries than 15 years ago and limited global supply of both crude and refined products, the continent is struggling to meet demand. While the release of stored fuel will offer some relief, its impact may be limited as the market has likely priced it in, and repeating such a release could be difficult.
Countries with sufficient local refining capacity, like Bulgaria, which recently lifted its own export ban, might be asked to increase shipments to other EU members. However, the Chinese fuel ban and Russia's extended diesel export ban, coupled with ongoing repairs at Middle Eastern refineries hit by Iranian strikes, leave the U.S. as a primary source of refined fuels. The U.S. is actively working to keep domestic prices under control.
The energy crisis has unequivocally proven that energy security is now the paramount concern for nations worldwide, even for European countries that have been leading decarbonization efforts. While decarbonization remains a stated priority, securing sufficient fuel for local markets and consumers has taken precedence.