Key facts
- US crude oil production is set to average a record 13.8 million barrels per day in 2026.
- Diesel prices have reached record highs despite increased crude output.
- US distillate inventories are expected to remain below the five-year range through much of 2027.
- Refineries are operating at approximately 96% capacity, limiting further diesel production.
- Global supply disruptions in the Middle East, Russia, and China have tightened diesel availability.
- US net distillate exports have been near five-year highs for much of 2026.
The United States is experiencing a diesel crisis characterized by record-high prices and critically low inventories, despite achieving record levels of crude oil production. This situation highlights the disconnect between crude oil extraction and the availability of refined products like diesel.
According to the Energy Information Administration (EIA), U.S. crude production is projected to average a record 13.8 million barrels per day in 2026. However, this surge in crude output has not translated into more diesel fuel. Refineries, which process crude oil into various products, face limitations in their ability to simply increase diesel production. A typical 42-gallon barrel of crude yields approximately 11 to 13 gallons of ultra-low-sulfur distillate, which primarily becomes diesel or heating oil, and about 19 to 20 gallons of gasoline. These proportions are constrained by refinery configurations and the chemistry of crude oil.
U.S. refineries are already operating at high capacity, reportedly around 96% during the third quarter, to meet strong refining margins. This leaves little idle capacity to ramp up diesel production. Furthermore, total U.S. refining capacity has slightly decreased, standing at about 18.2 million barrels per day at the start of 2026, down from the previous year. Building new refining capacity is a costly and time-consuming endeavor, facing uncertainties related to long-term demand, environmental policies, and electrification.
The diesel shortage is a global issue. U.S. distillate inventories fell below their five-year range in April due to significant supply reductions from the Middle East, Russia, and China. Russia has restricted exports due to damage to its refining system, while conflict in the Middle East and China's efforts to rebuild its own inventories have further tightened global diesel availability. Europe, which has reduced its refining capacity over the past decade, is particularly vulnerable to these supply constraints.
Despite low domestic inventories, the U.S. has maintained high levels of distillate exports as global markets offer attractive prices. The Trump administration considered restricting these exports but ultimately decided against a ban, recognizing the interconnectedness of petroleum markets and the potential for unintended consequences on other products like gasoline.