Diesel crisis can’t be fixed by Russian deals, leaving peace the only answer

Announcements by President Trump that Russia and Ukraine had agreed to cease attacks on energy infrastructure; the U.S. would import diesel from Russia; and more recently the suggestion that the “dark fleet” of sanctioned oil tankers be brought under U.S. control, come amidst intense political pressure from high oil prices. In the U.S., the national average price of diesel reached $6.28 per gallon in mid-October, about 70% higher than a year ago.

Understandably, the Administration wants to help truckers, farmers, and other users of diesel: they are hurting. There is little discretionary consumption that can be cut back. Crops must be harvested and goods and materials must be moved around the country.

Globally, 28 million barrels a day of diesel is used and U.S. consumption averages 3.9 mb/d. Refinery production is 5 mb/d, far in excess of consumption, which is why 1.5 mb/d has been exported in 2026, mainly to Europe and South America, with Mexico as the biggest buyer. Buying Russian diesel will do little to change the market, even if any is actually shipped. The initial 300,000 metric tons is only 70 thousand barrels a day over a month.

Pre-war, the Gulf exported 1 mb/d of diesel, half of which went to Europe. This remains mainly lost to markets due to damage to refineries and the complex logistics of exporting products, which typically move in smaller ships. Sourcing enough product carriers to go into and out of the Gulf is problematic and remains risky even with the considerable presence of the U.S. Navy.

In 2025, Russia exported 0.8 mb/d of diesel. In September, this fell to 0.15 mb/d, due mainly to attacks by Ukraine on refineries. Russia ceased exports to support the domestic market. The question though, in light of continuing Ukrainian attacks on Russian refineries, is can the export volumes envisaged be relied upon? They will probably need to come from the domestic market, adding even more pressure on the struggling Russian economy. And will they be of the required quality?

In light of the two conflicts, there has been a focus on global refining capacity. Oil consumption in the OECD countries peaked in 2005; since then, it has fallen by 10% with the U.S. down by 6%. So, how much refining capacity is needed in stagnant markets? In 1980, the U.S. had 301 refineries and today there are 130: many plants were shuttered because they were uneconomic in the face of products standards mandated by successive Administrations. Despite the closures, U.S. refinery capacity is almost unchanged; so, plant closures have contributed little to the current tightness: it is malfunctioning global supply that is the problem.

In Europe, refining capacity peaked in1980 and today it is nearly 40% lower. Refining capacity in the Middle East is now 12 mb/d, almost as large as Europe’s, and China’s capacity overtook the US’s in 2023. In other words, capacity has shifted from mature products markets to growth markets.

Soon after the Middle East war started the International Energy Agency coordinated a 426 mb release of government held stocks. Until recently, only about 330 mb have actually been released. The remaining 100 mb is supposed to be fast-tracked into the market in the coming weeks; the point to remember is that strategic stocks are offered to the market, not force-fed. Details of the releases, including quantity, quality, release locations and volumes, and the terms under which released barrels are returned to stockpiles, vary from country to country. It is not a simple process.

I believe that there is a case for re-examining the IEA’s strategic stock system that was founded as far back as 1974. It was designed in the wake of the Arab oil embargoes imposed on western countries in 1973; it was not designed to cope with a sustained closure of the world’s most important oil transit point in the Strait of Hormuz.

IEA countries have varying ratios of crude versus products in their strategic stocks: overall, there is roughly a 50:50 split. Countries with major refining capacity hold more crude oil than products: the U.S. and Japan are examples. Other countries choose to hold a higher share of products, and this is common in Europe. The U.S. holds only crude oil in its strategic stockpile. Today’s crisis in diesel raises the issue as to whether stocks of diesel and other products should be mandated, and this is an issue the Administration should examine.

Another possible measure to deal with the U.S. diesel emergency is to ban exports. As Energy Secretary Chris Wright said, it is a bad idea. In response, refiners would cut back on diesel production which would inevitably affect the production of other products, including gasoline.

Put simply, the only solution to the current stresses in oil markets is peace. Unfortunately, that does not seem likely in the near future.

Neil Atkinson is a former head of the oil division at the International Energy Agency and a former analyst at Petroleos de Venezuela S.A. He is currently a Senior Fellow at the National Center for Energy Analytics, Washington DC. He is based in Paris.

This article was originally published by RealClearEnergy and made available via RealClearWire.

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[ H/T WorldNetDaily ]