Why diesel prices are rising more than crude oil

PARIS, France (AFP) -- Prices at the pump for diesel and other fuels are hitting fresh highs as the wars and the Middle East and Ukraine have not only choked off crude supplies, but also damaged refineries, with the resulting capacity constraints increasingly being felt. - French officials recently estimated that the global market is missing about 10 million barrels of crude oil per day. It is a considerable amount given the global economy had been consuming on the order of 105 million barrels per day before the Middle East conflict broke out.

Iran's blocking of the Strait of Hormuz shut in around 20 million barrels per day initially, but Saudi Arabia had shifted some exports to the Red Sea and some tankers have resumed transits. Saudi exports via the Red Sea are now down as Iranian-backed Houthis have gained control of the Bab al-Mandab Strait. The shock on global markets has been attenuated because nations had ample commercial plus strategic reserves as production had outstripped consumption in 2025.

Meanwhile consumption has dropped by more than one million barrels per day, according to the International Energy Agency (IEA), with China in particular sharply reducing crude imports and shifting to other energy sources. The IEA estimates that what it calls observed global oil stocks are now down by around 507 million barrels from before the war. This figure does not include countries like China that do not report data on their reserves.

- Diesel prices have been setting fresh records in both Europe and the United States. It is at a record average $6.52 per gallon in the United States on Monday, according to the AAA automobile association In France it hit a record average of 2.41 euros per liter (around $10.40 a gallon) on Sunday, according to an AFP analysis. "The current world energy crisis, then, is largely a crisis in petroleum products, refined from crude oil, rather than in petroleum itself," Nobel Prize-winning economist Paul Krugman wrote in a recent post.

"And its proximate cause is a global shortage of refining capacity," he added. Western nations have banned the import of Russian petroleum products and Russia has also introduced fuel export bans as Ukrainian attacks have damaged its refineries. That has left Russia's remaining buyers scrambling for supplies, pushing up prices.