Fuel exports from the Middle East and Ukraine have fallen sharply in the last few months. Damage to refineries and attacks on Russian oil plants have cut production. Europe, which already struggles to refine enough diesel on its own, now faces a tightening supply. A combination of geopolitical conflicts and supply chain problems has disrupted fuel flows that previously accounted for a third of global diesel exports last year.
The Strait of Hormuz, a key shipping route for fuel, is also facing disruptions. These problems hit at a bad time: buyers around the world are already starting to stock up ahead of winter. That seasonal demand is about to collide with a shrinking supply. The Middle East conflict and damage to Persian Gulf refineries have compounded the crisis. As winter approaches, this shortage could lead to a much larger crisis.
Why Europe is most at risk
Europe’s reliance on imported diesel makes it the most vulnerable region. Diesel is used to run transportation, construction, and heating systems — all big users. But imports are now harder to get. Inventories are down 30% since March, and prices are climbing faster than oil. Sanctions against Russian refined products and restrictions on fuels processed from Russian crude in third countries are worsening the situation. European refiners lack the processing capacity to meet domestic demand, making them dependent on global supplies.
Eugene Lindell from FGE NexantECA called the situation “a tremendous diesel problem.” High prices could hurt economies through rising freight costs and inflation. That’s a risk for governments across Europe. Lindell warned that this could lead to political pressure on leaders as costs rise for consumers and businesses. The ICE Futures Europe diesel price, a global benchmark, has already risen almost 40% since a low on June 18, far outpacing the 5% increase in Brent crude over the same period.
Little help is coming from the US or Asia
The US is currently sending a record amount of diesel to Europe. But American demand is also rising, especially for heating fuel as winter approaches. Refiners on the Gulf Coast, which supply much of the diesel to Europe, will soon shift shipments to the East Coast. Zameer Yusof from Kpler explained that US refiners cannot sustain the current export levels to Europe indefinitely, as their own needs will increase in the coming months. Winter heating demands will drive more production to domestic markets.
Asia is in a similar position. Refineries in the region are producing kerosene for local winter needs, which means less diesel can be exported. “They have their own fish to fry,” said Zameer Yusof from Kpler, a reference to local demand taking priority. China’s export levels in the next few months will be particularly important. If it cuts back, Europe will feel the pinch even more. Refiners in Asia may also prioritize making kerosene for countries like Japan, further reducing the diesel available for export.
What to watch in the coming months
The coming weeks will be crucial for traders and governments. The size of the winter demand will depend on how cold it gets. Refiners may also be able to help, if they can push production to make up for the shortfall. However, with global refining capacity already stretched, it is unclear whether enough diesel can be produced to meet growing needs. The situation in Ukraine and the Middle East will also play a major role in whether supplies can recover.
Still, the basic problem remains: Europe lacks the refining capacity to meet its own needs, and global supply is under strain. The result is a fuel shortage that’s not here yet, but could be soon. As the Northern Hemisphere heads into winter, demand for diesel will rise even further. This could lead to extreme flat prices and a major inflationary impact. Europe’s situation is more dire than other regions such as Africa and Latin America, which also compete for Atlantic Basin diesel.
Rachel Ziemba, an adjunct senior fellow at the Center for a New American Security, explained that Europe's supply challenges are being compounded by sanctions. These limitations have added to the complexity of finding alternative sources.
June Goh, a senior oil market analyst at Sparta Commodities, said Europe's struggles stem from refining losses in the Middle East and reduced Russian capacity.