Diesel Shortage Hits 8%: How Freight Costs Will Surge This Winter
Global diesel supply has plunged by 8%, removing 2 million barrels per day from markets.
Global diesel supplies have dropped by 8%, a decline that is sending shockwaves through the trucking and freight industries. According to Andy Lipow, president of Lipow Oil Associates, simultaneous disruptions in Russia and the Middle East are tightening diesel markets, even as crude oil prices remain relatively stable. The combined loss amounts to roughly 2 million barrels per day, with direct consequences for carriers, shippers, and consumers across the U.S.
In Russia, Ukrainian drone strikes have severely damaged refining infrastructure, taking between 30% and 50% of the country’s 6.5-million-barrel-per-day refining capacity offline or forcing cutbacks. Before the conflict, Russia exported 800,000 barrels per day of diesel fuel. Recent attacks, including one involving 1,900 drones over a single weekend, have targeted additional refineries, including a major facility outside Moscow. Lipow warned that repairs could take months, if not years, particularly under ongoing U.S. and European sanctions.
Key Disruptions in Russia and the Middle East: Diesel
The Middle East has also faced significant disruptions. Houthi missile and drone strikes forced the shutdown of Saudi Arabia’s East-West Pipeline, which had been transporting 2.8 million barrels per day of crude oil to five Red Sea refineries. At peak capacity, the pipeline could handle 7 million barrels per day, delivering 650,000 to 800,000 barrels per day to European markets.
Brent Crude
The shutdown, now in its 11th day, has further strained global supplies. Additionally, the Jizan refinery, a 400,000-barrel-per-day Saudi facility, was struck in late July, reducing diesel output by over 200,000 barrels per day. Before restrictions, the Strait of Hormuz handled 1.2 million barrels per day of diesel exports, a critical route for global fuel distribution.
The supply crunch is already driving up costs for the U.S. freight industry. In California, diesel prices have surged to nearly $8.50 per gallon, affecting truck and rail operations servicing the ports of Los Angeles and Long Beach, which handle 40% of U.S. container imports. While West Texas Intermediate (WTI) crude trades at $103 per barrel, diesel is priced at the equivalent of $270 per barrel, compared to gasoline at $188 per barrel. This widening crack spread underscores the severity of the distillate shortage.
Immediate Impact on U.S. Freight and Winter Preparations
The timing of the crisis could not be worse. With winter approaching, U.S. East Coast diesel inventories are at their lowest level for this time of year since 1982, when the Energy Information Administration began tracking the data. Domestic refineries are already operating near full capacity, leaving little room to increase production. Lipow cautioned that Northeast homeowners relying on heating oil may face bills close to $1,000 for a standard 150-gallon delivery if diesel prices remain above $6.50 per gallon.
As disruptions show no signs of easing, the freight industry is preparing for sustained price pressures, with higher costs likely to ripple through supply chains and consumer prices in the coming months.
Sign up free to ask CAMAL AI for a summary, the key points or anything else about this story.
Related stories
CAMAL AI
Financial Ports Newsletter
The maritime economy, every morning
Ports, shipping and freight markets in one short email. Free.
