Oil Prices Could Crash — Diesel Might Not with Rory Johnston and Mikkel Rosenvold

The global oil market faces a structural refining crisis and severe geopolitical instability, primarily driven by the ongoing conflict in the Middle East and the Russia-Ukraine war. Rory Johnston, founder of CommodityContext.com, highlights the "Beijing swing"—China’s massive, strategic reduction in crude imports—as a critical factor that unexpectedly helped balance the market during the Strait of Hormuz crisis. However, a generational shortage in refining capacity, worsened by targeted attacks on Russian and Middle Eastern infrastructure, has pushed diesel crack spreads to record highs. This creates an insidious, creeping inflationary pressure that persists despite temporary fluctuations in crude oil flows. With shipping costs surging and the global market increasingly balkanized, current diplomatic efforts, including sanctions relief and energy truces, fail to address the underlying supply-side constraints, leaving the energy sector vulnerable to sustained volatility and systemic supply-demand imbalances.