Global diesel supply is expected to stay tight well into next year, and consumer prices have already climbed thanks to record fuel costs at the pump, according to a recently published report by the International Energy Agency.
“Constrained middle distillate supplies” are expected “to persist well into 2027,” says an IEA report published October 14. Diesel inventories have been heavily depleted thanks to the wars in Iran and Ukraine, and it’ll take time to recover, assuming geopolitical circumstances allow said recovery and don’t worsen.
The report overlooks a major contributor to global diesel supply, that being a four-decade trend of declining refining capacity in America. You can learn more about that in our report “Fuel Skyrockets As Wars, Tight Refineries, and Record Diesel Profits Collide.”
Exports Down
The world’s two major wars have significantly cut diesel exports. In September, global diesel exports came out to 700,000 barrels a day lower than they were that same month last year. And with $220 a barrel for wholesale diesel in the U.S. and Europe, the Russian diesel deal President Donald Trump announced on October 9 is projected to bring little relief, assuming it even goes through (there may be some legal obstacles related to prior U.S.-approved sanctions). “Goldman Sachs estimates the first two shipments would lower diesel prices by $1 to $2 a barrel,” PriceOfOil.com reported, adding that the IEA plans to release 20 million barrels of diesel soon, which only “buys days of demand, not a season.”
Diesel Affects Everything
Diesel and economies are “deeply intertwined.” The IEA notes that record diesel prices have already begun raising the cost of virtually everything people buy. If it’s on the shelves of grocery, retail, and hardware stores, it was likely brought there by a truck that runs on diesel. “Record diesel prices are already having broad economic consequences by raising the cost of goods and impacting real incomes, economic activity, and inflation,” says the IEA report. Reuters reported that U.S. truck freight transportation expenses rose by 19 percent in September compared to the same month last year. This resulted in higher-than-expected price increases on groceries, retail merchandise, delivery costs, farm production expenses, and manufacturing costs.
The unprecedented price of diesel is also driving trucking companies into bankruptcy, as we previously reported.
And the worst may be yet to come. War and war-adjacent conflicts may push already high prices even higher, according to the IEA:
As tensions in the crude freight market have spread to other tanker categories, delivered diesel prices in the dominant gasoil importing markets — Europe, Africa and Latin America — could rise again in the coming weeks.
PriceOfOil noted how the Strait of Hormuz, which seems to waver between almost passable to utterly dangerous from day to day, landed in the second category last week:
The strait got more dangerous, not less. A Singapore-flagged container ship was hit and sank, one of at least nine ships attacked near Hormuz since Sunday. Crude shipments through the strait fell to 9.4 million barrels a day in the week to Wednesday, about 70% of the prewar average, Kpler data show.
This sent oil prices surging. Oil futures ended higher than the previous week. Brent finished at $109.86, a five-percent increase. WTI (West Texas Intermediate), the main U.S. benchmark, spiked by more than 10 percent, to $101.41 a barrel.
Ukraine’s Drone Attacks
The IEA notes the problems caused by the Ukraine war in particular. “Russian gasoil production and exports have slumped in recent months due to increasing damage to refineries from Ukrainian drones,” the report says.
Before Russia invaded Ukraine in 2022, Moscow was the third-largest producer of refined oil products, churning out 6.5 million barrels a day. By June of this year, that number had fallen by more than 41 percent, to 3.8 million barrels per day. The IEA noted back in September how effective Ukraine had become at hitting Russian refineries: “In the first eight months of 2026, a Russian refinery was hit on average once every three days.”
Energy Ceasefire
This explains why Trump called for an energy ceasefire in Ukraine. It’s one of two major causes of high global energy prices. Moreover, it’s the war he didn’t start. Also, if he can get Russian fuel flowing again and production back up, it reduces the immense leverage that Iran and its regional proxies have exerted on him by sabotaging Middle Eastern energy exports.
Unfortunately for him, no one took his call for an energy ceasefire seriously. Russia never acknowledged the supposed agreement, and Ukraine hit a refinery in Russia’s Ryazan region four days later after realizing Moscow had no intention of halting its attacks on Ukrainian power structures to begin with.
Trump Favoring Russia
Reports say Russian President Vladimir Putin is using the latest bout of chumminess between him and Trump to try to arrange a meeting between the two and Chinese leader Xi Jinping. The meeting would not, however, include Ukrainian president Volodymyr Zelensky.
Trump has not publicly agreed to the meeting yet, but he is using his Truth Social microphone to defend against backlash he’s received for working with Putin and making agreements to buy Russian energy, which he did less than a month after he signed a sanctions packaged targeting Moscow. The new agreement includes wavers on some of those provisions. The president posted on Sunday:
My decision on Russia is a very simple one. I am in the process of negotiating Peace in the war between Russia and Ukraine, and don’t want to do anything that will drive, foolishly, Russia away from the bargaining table. Great progress is being made, and that includes current hostage negotiations!
Trump is also back to blaming Zelensky for the uphill battle of convincing Russia and Ukraine to agree on a peace deal. Trump:
Zelenskyy doesn’t care, and frankly, with all of the money that Europe is famously giving him, and that Crooked Joe Biden gave him in the past, he doesn’t want to end this war, and probably never did. He could have made a better deal two years ago than he can now. His country is in shambles, a large portion of his land is lost, his oceans and seas are gone, and his male population is low, wounded, and/or dead. I WANT THIS WAR END!
Good News?
If there is any good news, it’s that fuel demand is expected to drop over the coming months and that oil production increased by 2.5 million barrels per day in September, thanks in large part to Gulf producers. “A recovery in Middle East oil supply was well underway in September, with Gulf crude oil exports approaching pre-war levels,” the IEA reported, but “recent escalation in attacks on regional energy infrastructure and tanker traffic is threatening to derail further gains.”
World oil demand is projected to drop by 2.5 million barrels per day between October and December of this year. On average, supply has dropped by 5.8 million barrels per day in 2026. The IEA expects a reversal in 2027 with an increase of 7.7 million barrels per day, but there’s no guarantee that will happen. It notes that “renewed attacks in the Gulf leave the recovery fragile.”
So, there is no guarantee of a fuel recovery in 2027. The only apparent assurance is that, in a best-case scenario, assuming the geopolitical circumstances don’t worsen, there might be a recovery.
