Key facts
- Global automotive diesel prices have increased by 14% since February, while gasoline prices have stabilized.
- Geopolitical tensions involving Iran and disruptions in the Strait of Hormuz have significantly impacted fuel markets.
- Russian refinery strikes have reduced processing rates, tightening global diesel supply.
- National taxes and currency fluctuations play a significant role in pump prices, alongside crude oil costs.
- U.S. diesel prices stood at $4.96 per gallon and gasoline at $3.93 in July.
Global fuel markets are experiencing a bifurcated recovery, with diesel prices remaining stubbornly high while gasoline prices have stabilized, according to the latest data from the International Energy Agency (IEA).
Five months after the U.S. and Israel initiated a conflict with Iran, the average per-liter cost of automotive diesel tracked by the IEA stood near $1.94 in July, approximately 14% higher than in February. This price is even above June levels, despite a general slide in crude oil prices over the summer. Gasoline prices, while telling a similar story, have shown more moderation, easing from a May peak of $1.99 per liter to $1.90 in July.
The initial surge in crude oil prices, with Brent crude jumping from around $72 a barrel to nearly $120, was triggered by the killing of Iran's supreme leader. This event led to a near cessation of tanker traffic through the Strait of Hormuz, a critical oil transit route. Although crude prices have since retreated, Brent is currently trading around $88 a barrel, still more than 30% higher than a year ago. J.P. Morgan forecasts Brent to average $86 in the third quarter and drift towards $78 by year-end, contingent on the conflict not escalating.
Negotiations between Iran and Oman to fully reopen the Strait of Hormuz are ongoing and have caused price volatility. A previous memorandum of understanding between the U.S. and Iran collapsed quickly over shipping route disagreements, and attacks on tankers and Saudi Arabia's Jazan refinery have continued to surface.
The IEA's country-specific data reveal the uneven impact of these events. Germany saw diesel and gasoline prices jump over 10% in July alone, partly due to the expiration of a temporary fuel-tax discount. Poland experienced an even sharper increase, while prices actually decreased in the U.K., Ireland, Sweden, and Cyprus, underscoring the influence of national taxes and currency movements.
Diesel's persistent strength in July is also attributed to tighter distillate supply. Drone strikes on Russian refineries have reduced processing rates to a 24-year low, leading to fuel rationing in many regions and impacting global diesel availability. In the U.S., July diesel prices were approximately $4.96 a gallon and gasoline $3.93, both significantly above year-ago levels.