Days after Donald Trump announced a deal to import Russian diesel into the US in an effort to lower soaring pump prices, the world’s energy watchdog has warned that the global fuel shortage will drag into 2027.
Trump’s temporary sanctions reprieve was criticised for offering “too little, too late” to temper the sky high pump prices triggered by the shutdown of war-damaged refineries in the Middle East and Russia – once the world’s second-largest diesel exporter behind the US.
The International Energy Agency said on Wednesday that the shortage would stretch into the new year despite plans to ease trade sanctions or release emergency stockpiles, in a blow to the global economy.
“Record diesel prices are already having broad economic consequences by raising the cost of goods and impacting real incomes, economic activity, and inflation,” the IEA added.
Yet amid this gathering economic gloom some of the western refineries that turn crude oil into fuels are preparing to have their day. The global shortage that has led to high prices on UK forecourts is poised to hand them record profits.
“I prefer the world of disruption to the peaceful world,” the boss of French energy company TotalEnergies, Patrick Pouyanné, mused last week. He said the energy crisis ignited by almost eight months of war in the Middle East had provided “plenty of opportunities if you’re able to capture them”.
For Pouyanné, the key to reaping the benefits of a global fuel crisis lies in owning a string of refineries across Europe that stand ready to cash in by selling diesel into a starved market.
Diesel accounts for 10% of the world’s energy consumption, and is known as a “workhorse” fuel for its role powering the equipment vital for sectors ranging from agriculture, mining and manufacturing to shipping and logistics. But by last month supplies into the global market had fallen by about 1m barrels a day from their 2025 level, owing to a combination of damage to refineries in the Gulf and Russia, and export restrictions from China.
The soaring costs for businesses and consumers have economists worried. They are already piling pressure on areas of the global economy from US farmers in the midwest corn belt to local bus operators in England. Many fear a broader impact, as fuel prices raise the cost of food, goods and transport across the economy.
However, for some of the companies that turn crude into diesel this is a very lucrative crisis.
Refinery ‘goldmines’
“We’re doing really well by being integrated,” Pouyanné explained. “Integration means your refineries in Europe, which you thought were liabilities, are suddenly becoming goldmines.”
These goldmines helped TotalEnergies to its strongest quarterly profits in three years this summer, after income from its refining and chemicals business more than quadrupled to $1.8bn (£1.35bn) between April and June.
TotalEnergies is far from alone in its good fortune. The biggest windfalls are likely to come from refiners in the US, where exports of fuel products have climbed by more than 50% in the last year from about 1.25m barrels a day to an all-time high of 1.9m barrels a day over the summer, effectively offsetting the losses from Gulf refineries.
The market value of three of the largest US oil refiners – Marathon Petroleum, Valero Energy and Phillips 66 – have more than doubled since the start of the crisis. The US listed stocks have climbed by a combined $215bn this year as their shares rose steadily to reach successive record highs. In the coming weeks these refineries are expected to reveal their largest-ever profits.
Europe’s largest oil and gas company, Shell, told investors last week it expects to make record profits from each barrel of fuel produced over the last three months after it reported its second highest quarterly profit ever over the summer. Shell’s refining margins are forecast to nearly double to $42 for each barrel of refined product sold in the July to September period, up sharply from $24 a barrel in the second quarter.
The companies are benefiting from the price difference between a barrel of crude oil and the barrel of refined fuel. The Brent crude benchmark price has eased back to oscillate around the $100 a barrel level in recent weeks, helped by an uptick in cargoes leaving the Gulf region, although given recent fears about the Middle East conflict escalating it is back above the $106 mark. . Meanwhile, fuel exports have remained constrained and global stockpiles of diesel, gasoline and jet fuel have continued to shrink. The supply squeeze means that while oil prices are lower than feared at this point, the cost of diesel is far higher.
Fuel flex
Refiners that produce diesel and jet fuel have fared best in the crisis. Some have been able to flex their capacity to produce more of the fuels in high demand; a strategy which has helped to ease the supply crunch and capture high revenues.
“Think about the early days of the crisis,” the BP chief executive, Meg O’Neill, said last week. “If you go back to March and April, the first front of shortage risks was in Australia, where they were very worried about diesel and diesel availability; and you might have seen news coverage of petrol stations being out of diesel. Our team responded very quickly.”
O’Neill, who officially stepped into the top job in April this year, told an industry conference in London that BP was able to ship diesel to its customers in Australia from its Rotterdam refinery in the Netherlands and its Cherry Point refinery on the US west coast.
“Roll forward, the next wave of the crisis was jet fuel in Europe, and everybody was saying, ‘Can people go on their holidays? Maybe we shouldn’t travel.’ Our refineries were able to adapt their runs to produce 30% more jet [fuel] in May than they did before the conflict, again to make sure that the customer need was met,” she said.
“Roll forward to even more recently, the diesel price pressures that we’re seeing around the world, and our refineries have adjusted back to try to max diesel.”
However, not all refiners have been as able to adapt to benefit from the fuel supply squeeze. Many are shouldering the “crippling” cost of crude and fast-rising costs of hiring a supertanker while manufacturing products such as naphtha and gasoline (petrol) where prices are well below the highs seen for diesel and jet fuel, the IEA said.
In north-west Europe, the profit margins for refineries – known as the “crack spread” – has fallen from $54 a barrel at the start of September to as low as -$11 a barrel earlier this month.
Ultimately, the shift to diesel could lead to a surplus of the fuel by early next year, according to the IEA, while creating the conditions for the next fuel squeeze: gasoline. If refineries which produce the fuel were forced to lower their run rates to avoid spiralling losses, then petrol pumps could become the next frontier of the crisis.