The Global Diesel Problem

Diesel serves as the essential fuel for the global industrial economy, powering everything from agriculture and shipping to home heating. Currently, the market faces a severe supply deficit of approximately 1.5 million barrels per day, driven by geopolitical disruptions in the Middle East and Russian refinery outages. This scarcity has pushed the "crack spread"—the price difference between crude oil and refined diesel—to record highs exceeding $100 per barrel. Despite these elevated costs, significant demand destruction remains elusive, as many consumers rely on existing inventories or lack viable alternatives. Furthermore, while some nations consider export bans to stabilize domestic prices, such measures risk unintended consequences, potentially tightening supply further or causing price spikes in other refined products like gasoline. Martijn Rats, Head of Commodity Research at Morgan Stanley, provides this analysis on the current state of the global diesel market.