Stories
Diesel Shortage Emerges as Greater Global Oil Risk Amid Falling Inventories
- •Diesel supply is becoming a major risk for the global oil market due to falling inventories and prices rising twice as fast as gasoline since summer.
- •Diesel is critical for transport and industrial activity, meaning shortages can directly disrupt the movement of goods and fuel inflation faster than gasoline.
- •Global oil inventories have declined for over seven months, making supply conditions dicey in regions like India.
- •The US is considering restricting diesel exports and pushing European and G7 countries to release strategic reserves early despite having no physical shortage.
- •Spot crude and refined products are trading at a high premium to future delivery contracts, forcing immediate buyers to pay much higher prices.
Key Questions Answered
Diesel is critical for transport and industrial activity, directly enabling global economic activity and feeding into inflation more quickly than gasoline. Unlike gasoline where driving can be cut back, a shortage or price surge in diesel can sharply disrupt the movement of goods.
US diesel inventories fell to 107.9 million barrels, marking the lowest level for that time of year since records began in 1982. Despite having no physical shortages or queues, the US is considering restricting diesel exports and has pushed European and G7 countries to release strategic reserves earlier than planned.
The crisis is driven by a shortage of refined petroleum products and limited refining capacity rather than a lack of crude oil. Refining capacity and fuel exports have been squeezed by disruptions and infrastructure attacks in the Middle East and Russia, keeping inventories at historic lows.
