Key facts
- Damaged refineries in the Middle East and Russia are contributing to a global fuel crunch.
- Insufficient refining capacity elsewhere cannot offset supply disruptions.
- Global fuel prices are expected to remain high into 2027.
- Refinery crude throughputs in July were significantly below year-ago levels.
- Millions of barrels per day of refining capacity are currently offline globally.
Global fuel prices are likely to remain elevated into 2027 due to a significant crunch in refining capacity, according to analysts. Conflict in the Middle East and strikes on facilities in the Persian Gulf have disrupted supply, while Ukrainian attacks on Russian refineries have led to an export ban on diesel from Russia.
These factors are tightening global fuel markets, with existing capacity unable to compensate for the lost refined product flows. Nikhil Agarwal, managing director of Globestar Energy, noted that rebuilding damaged refineries in regions like the Middle East and Russia will take years. He highlighted that while crude oil is in surplus globally, the lack of refining capacity prevents it from reaching the market, particularly impacting diesel.
The International Energy Agency (IEA) reported in August that refinery crude throughputs in July were nearly 5 million barrels per day below year-ago levels. Brian Mandell, Executive Vice President of Marketing & Commercial at Phillips 66, stated that approximately 7 million barrels a day of refining capacity is offline in Asia and the Middle East, with an additional 1.4 million barrels per day down in Russia. He added that the time required for these damaged refineries to come back online depends on the extent of the damage and the availability of spare parts.