The World Is Running Short on Diesel. Major Conflicts Are Making It Worse.

The global diesel market is facing an increasingly severe supply crunch as the Russia-Ukraine war and the protracted conflict between the U.S. and Iran disrupt refinery operations and exports, raising the risk of higher fuel and transportation costs heading into winter.

Diesel has emerged as one of the most vulnerable parts of the energy market, according to an Axios report, with disruptions stretching from Russia and the Middle East to Asia. The squeeze is already reaching American consumers. The average U.S. diesel price has climbed 44 cents over the past month to $5.32 a gallon, compared with $3.71 a year ago, according to AAA.

Prices remain below the record $5.82 a gallon reached in June 2022, but analysts warn that the global market has fewer ways to absorb another disruption. An analysis from S&P Global Energy cited by the outlet found that refineries worldwide processed 7.5 million fewer barrels of crude per day last month than during the same period in 2025. The International Energy Agency also reported a steep decline in global refinery processing in its August oil market report.

The problem is not coming from a single region. Renewed hostilities around the Strait of Hormuz have restricted supplies following earlier hopes that oil flows could begin returning to normal. Middle Eastern refineries are operating well below their potential because capacity remains damaged, stranded by logistical problems or unable to restart reliably.

Russia is adding another layer of pressure. Moscow has restricted diesel exports following Ukrainian drone attacks against Russian refineries, removing roughly 10% of seaborne diesel supplies from the global market. At the same time, refinery activity in China remains subdued, limiting another potential source of fuel.

The combined impact is substantial. Diesel exports from Russia, the Middle East and Asia were 1.3 million barrels per day lower in July than a year earlier, according to the IEA. That volume is equivalent to about 20% of global seaborne diesel trade. "Diesel is the tightest market right now," Amrita Sen, founder of market intelligence firm Energy Aspects, told Bloomberg TV.

The U.S. is not insulated from the global shortage. The Energy Information Administration this week raised its forecast for average retail diesel prices in 2026 to $4.85 a gallon, up from the $4.61 it projected last month. The agency also increased its 2027 forecast slightly, from $4.02 to $4.07 a gallon.

Higher diesel prices can spread rapidly through the economy because the fuel powers trucks, construction equipment, agricultural machinery and other heavy-duty vehicles. Fuel represents roughly 20% to 25% of trucking companies' operating expenses, according to the American Trucking Associations.

Rising diesel costs can therefore increase the expense of moving everything from groceries to manufactured goods. American refineries have helped supply the increasingly tight international market by exporting more diesel, but there may be little room to increase production further.

S&P estimates U.S. refineries are already operating at about 96% of capacity. That leaves the market particularly exposed as the peak of Atlantic hurricane season approaches and refineries prepare for traditional fall maintenance. Any significant outage could further reduce available supplies at a time when inventories have a limited cushion.

Winter could create an additional challenge. Diesel and closely related refined products are also used for heating in many countries, meaning seasonal demand could collide with already constrained supplies. "I think we are underestimating just how tight diesel can be this winter," Sen said.The outlook will depend heavily on geopolitics.