The world is struggling to make enough diesel
oil refiners are proving powerless to make enough diesel, opening a new inflationary front and depriving economies of a fuel that powers industry and transport alike.
While oil futures are rocketing — on Friday they were just below $95 a barrel in London — the rally pales in comparison with the surge in diesel. US prices jumped above $140 to the highest ever for this time of year on Thursday. Europe’s equivalent soared 60% since summer.
And it could get worse. Saudi Arabia and Russia have turned down the taps on production of crudes that are richer in diesel. On Sept. 5, both nations — leaders in the OPEC+ alliance — announced they would prolong those curbs through year-end, a period in which demand for the fuel usually picks up.
“We’re at risk of seeing continued tightness in the market, especially for distillates, coming into the winter months,” said Toril Bosoni, head of the oil market division at the International Energy Agency, referring to the category of fuel that includes diesel. “Refineries are struggling to keep up.”
The situation is challenging for a global refining fleet that’s been dogged by lackluster production for months. Searing Northern-Hemisphere heat this summer forced many plants to run at a slower pace than normal, leaving stockpiles stunted.
There’s also been pressure on them to make other products instead like jet fuel and gasoline, where demand has rebounded hard, according to Callum Bruce, an analyst at Goldman Sachs Group Inc.
Other Fuels
All this comes on top of a global refining system that shuttered less-efficient plants when Covid-19 trashed demand. Now consumption is rebounding but many refineries are gone.
There’s still hope that the diesel crunch can ease. With cooler winter months
