Diesel’s Record Run: Why Refining, Not Crude, Sets The Price

Two prices that usually move together have come apart this year. Crude oil, the raw material, is cheaper today than it was in April. Diesel, the fuel refined from it, has never cost more. AAA put the national average at $6.50 a gallon on Sept. 25, a few cents below the record $6.53 set Sept. 22. The Energy Information Administration’s weekly survey put the average at $6.529 that week.

If crude isn’t driving the rise, what is? We went through the government’s own price data, the major energy agencies’ latest reports, and seven months of reporting on the wars that have hit the world’s oil supply. The short answer: most of the increase since the war began sits in the gap between what crude costs and what refined diesel sells for.

That gap reflects what refining adds to the price. The longer answer runs from the Strait of Hormuz to the Red Sea to refineries across Russia.

What we measured

A barrel holds 42 gallons. Dividing the price of a barrel of Brent crude by 42 gives the cost of the crude in each gallon. Subtracting that from the wholesale price of diesel leaves a rough measure of what refining adds. The industry calls this the crack spread.

We used EIA’s monthly averages for Brent crude, wholesale ultra-low-sulfur diesel in New York Harbor, and U.S. retail diesel. For the latest week, we used EIA’s daily and weekly figures for Sept. 22.

Period	Brent ($/bbl)	Crude cost per gallon	Wholesale diesel, NY Harbor	Gap over crude	Retail diesel
February 2026	$70.89	$1.69	$2.50	$0.81	$3.72
April 2026	$117.29	$2.79	$3.99	$1.20	$5.50
August 2026	$91.08	$2.17	$4.25	$2.08	$5.46
Sept. 22, 2026	$114.89	$2.74	$5.01	$2.27	$6.53

What the numbers show

The IEA uses February as its pre-war baseline. Between February and August, retail diesel rose $1.74 a gallon. The crude inside each gallon accounted for 48 cents of that. The gap between crude and wholesale diesel accounted for $1.27, about three-quarters of the increase.

The spring tells the story most plainly. Between April and August, the crude cost in a gallon fell 62 cents. If crude were setting the price, pump prices should have come down with it. They didn’t. Retail diesel averaged $5.50 in April and $5.46 in August, because the refining gap widened 88 cents over the same months and absorbed the entire drop in crude.

The latest week follows the same pattern. On Sept. 22, retail diesel stood $2.81 above its February average. Crude explains about $1.05 of that, roughly 37 percent. The wider refining gap explains about $1.46, roughly 52 percent.

That doesn’t mean crude is irrelevant. The crude in each gallon costs about 62 percent more than it did in February, and that’s a real part of the bill. But over the same period, the gap between crude and diesel nearly tripled.

Gasoline makes a useful comparison. The same day, wholesale gasoline in New York Harbor traded at $3.55 a gallon, 82 cents above the crude cost. Diesel’s gap was nearly three times as large. To see why, you have to follow the barrels.

The hole in the world’s supply

The International Energy Agency’s September Oil Market Report, published Sept. 11, estimates that world oil supply will average 100.7 million barrels a day this year, 5.7 million less than in 2025. Global production fell to 100.1 million barrels a day in August. More than 10 million barrels a day of Gulf output remained shut in, the agency said, and it has pushed a full recovery of Middle East supply back to 2027.

The EIA’s September Short-Term Energy Outlook, released Sept. 9, arrives at a similar number from a different angle. It forecasts world production of petroleum and other liquids at 100.6 million barrels a day in 2026, down from 106.2 million in 2025, against consumption of 102.6 million.

The agency estimated that crude production shut-ins averaged 6.7 million barrels a day in August, up from 5.0 million in July. It assumed shut-ins would average 5.7 million in the fourth quarter, and that most production and trade would return to pre-conflict levels by the second quarter of 2027.

The world has been covering the gap from storage. The IEA said observed global inventories fell 95 million barrels in August alone, bringing the drawdown since February to 507 million barrels.

Saudi Arabia under fire

Saudi Arabia, OPEC’s largest exporter, has been hit from several directions at once. With flows through the Strait of Hormuz disrupted, the kingdom rerouted crude west through its East-West Pipeline to the Red Sea port of Yanbu. In late July, Yemen’s Houthis declared a blockade on Saudi Arabia, threatening ships using the Bab el-Mandeb, the strait at the Red Sea’s southern end.

The data firms tracking tankers did not agree on the damage. Kpler figures showed crude and condensate exports from Yanbu falling to between 2.4 million and 3 million barrels a day in the week of July 20, from 4.23 million the week before, Reuters reported. Vortexa put loadings at 3.8 million barrels a day and said about a third of the volume left on tankers with their transponders switched off.

The attacks reached Saudi refining, too. Aramco shut its 400,000-barrel-a-day Jazan refinery on July 27 after a Houthi strike damaged its gasification complex and tank farm, according to a note from industry monitor IIR reported by Reuters. After two more attacks, IIR said the restart had slipped to Aug. 30. We could not confirm the refinery’s current operating status.

The IEA estimated that Saudi crude supply fell 2.3 million barrels a day in August, to 6 million, the lowest in more than three decades, Reuters reported. The agency cited attacks on shipping in the Bab el-Mandeb, on Jazan and near Yanbu, and drone strikes on the Abqaiq processing site by Iran-backed militias in Iraq. Saudi Arabia’s own report to OPEC was higher: 6.238 million barrels a day produced and 7.122 million supplied.

September brought more. NPR reported that a Sept. 8 wave of Houthi attacks ignited fires at Saudi oil facilities and wounded 73 people. On Sept. 14, the Saudi-led coalition said Houthi missiles and drones struck Khamis Mushait, Abha and Taif, injuring 13 civilians. In mid-September, drone attacks also shut the East-West Pipeline itself.

Saudi Arabia restarted the pipeline on Sept. 22, Reuters reported, citing sources briefed on the matter, and Bloomberg separately reported that the kingdom was running tests to bring the line back. The pipeline had been carrying about 4 million barrels a day, around 4 percent of global supply, to Yanbu.

It restarted at a low rate, and a security source told Reuters a full resumption could take weeks. Brent futures fell more than $2 on the news. The restart eases pressure on crude supply. It does nothing directly for the refining shortfall.

Russia’s refinery war

The second front is in Russia. Ukraine has spent the year striking Russian refineries with drones. The IEA said a Russian refinery was hit, on average, once every three days during the first eight months of 2026, according to the Kyiv Post’s account of the agency’s findings.

By mid-September, Reuters calculated from fuel-market data that three of Russia’s six largest diesel-producing refineries, which together make about half of Russia’s diesel, had cut or halted output. The Kyiv Post, reporting those figures, said the Kirishi refinery had shut completely and that the Volgograd and NORSI plants were running at about a quarter of capacity.

Russia has responded by keeping its fuel at home. It banned diesel exports in July, The Moscow Times reported, and extended gasoline and diesel export bans through January 2027. Reports differ on the details. Citing the Russian daily Vedomosti, Hydrocarbon Processing reported on Sept. 16 that the current diesel ban for producers was due to expire at the end of September and would be extended through October.

We could not reconcile the two accounts. Either way, Russian diesel is largely off the world market for now. Hydrocarbon Processing also reported that President Trump had publicly urged Ukraine to stop targeting Russian diesel infrastructure.

Where the refining capacity went

Put those fronts together and the diesel shortage comes into focus. The IEA said global refineries processed 81.4 million barrels a day in August, 4.2 million fewer than a year earlier. It forecast refinery runs averaging 81.5 million barrels a day this year, 2.6 million below 2025.

Much of what disappeared was diesel that other countries used to export. The IEA said net diesel and gasoil exports from Gulf countries averaged 390,000 barrels a day in August, just over a quarter of pre-war levels. Combined Gulf and Russian diesel exports were 1.6 million barrels a day lower than in February.

The agency reported that diesel prices passed $200 a barrel in early September, 94 percent above pre-war levels, while crude traded near $105, and that refinery margins in the Atlantic Basin had hit records.

Wall Street expects the squeeze to last. Goldman Sachs more than doubled its 2027 forecast for diesel refining margins, to $63 a barrel in the United States and $49 in the European Union, up from $27 and $19, OilPrice.com reported.

According to that report, Goldman’s analysts said refinery outages were running about 60 percent above the seasonal average. This is a forecast, not a measurement, and it assumes a roughly even chance that current unplanned outages persist through next year.

Record U.S. crude, thin U.S. diesel

The United States is pumping more crude than ever. EIA’s weekly data put domestic production at 13.94 million barrels a day in the week ending Sept. 18, up from 13.50 million a year earlier. The agency forecasts a record 13.8 million barrels a day for 2026 and 14.3 million for 2027.

U.S. refineries are also running more crude than a year ago: 16.81 million barrels a day that week, compared with 16.48 million. Yet U.S. distillate stocks, which include diesel, stood at 107.4 million barrels, down from 123.0 million a year earlier. The EIA’s September outlook said global tightness had raised domestic prices and encouraged U.S. refiners to export more distillate.

It forecast that U.S. stocks would fall below 100 million barrels in September and stay below the five-year low through much of 2027. As of the Sept. 18 data, they had not yet fallen below 100 million.

That pull toward exports set off a brief debate in Washington this month. On Sept. 23, Politico reported that the administration was preparing a 90-day ban on diesel exports. A White House official denied it, Reuters reported. Energy Secretary Chris Wright said nobody was considering a flat ban, and that the discussion was about “the most efficient way to get more diesel into the United States of America.”

Who pays

Trucks carried about 72.7 percent of U.S. freight by weight in 2024, according to the American Trucking Associations. Most of those trucks run on diesel, so the refining gap shows up in freight costs regardless of where crude trades.

Farmers are paying it at harvest. The American Farm Bureau Federation reported that farm diesel cost $5.45 a gallon on Sept. 4, up from $3.02 a year earlier. The group noted that the U.S. Department of Agriculture forecasts farm fuel and oil expenses of about $22 billion this year, up nearly 29 percent from 2025.

Where you live matters, too. AAA’s state averages on Sept. 25 ranged from $5.92 a gallon in Texas to $8.44 in California. Washington was at $7.46, Hawaii at $7.19 and Oregon at $6.88.

What the forecasters expect

The EIA’s September outlook expects Brent to average around $90 a barrel in the second half of 2026 and $74 in 2027. It forecasts retail diesel at an average of $5.07 a gallon for 2026 and $4.40 for 2027, and gasoline at $3.84 and $3.35. It puts its measure of the diesel crack spread at $1.57 a gallon in 2026 and $1.25 in 2027.

Those forecasts come with a caveat. The EIA completed them on Sept. 3, before the attacks that shut the East-West Pipeline. In EIA’s daily data, the physical Brent spot price has since ranged from $114.89 to $130.80 between Sept. 15 and Sept. 22. The agency’s next outlook, due in October, will be the first to reflect the shutdown and restart.

What’s confirmed and what’s still developing

Confirmed: The U.S. price, production and inventory figures come from EIA’s published data and AAA’s daily survey. The world supply, refinery and export figures are the IEA’s and EIA’s own published estimates. The pipeline restart has been reported by Reuters and Bloomberg.

Still developing: How fast the East-West Pipeline returns to full flow, whether the Jazan refinery is running, how long Russia’s damaged refineries stay down, and how long Russia’s export ban lasts are all open questions. So is the war itself. Every forecast above assumes some de-escalation that has not yet happened.

There’s also a timing effect at the pump. Retail prices trail wholesale prices. Wholesale diesel in New York Harbor fell from $5.34 on Sept. 15 to $5.01 on Sept. 22, according to EIA data. Retail diesel still rose 24 cents that week. Part of the latest retail increase may reflect that lag rather than new pressure on supply.

How we did the math

Our figures use EIA’s spot price for physical Brent crude. That price has traded well above Brent futures this month, so our crude cost per gallon is on the high side. Using the lower futures price would make the refining gap larger, not smaller. The calculation treats the whole gap as refining. In practice, it also includes some shipping and blending costs.

EIA publishes its own monthly breakdown of the retail diesel price using different inputs. For May, the latest month available, it attributed 42 percent to crude, 25 percent to refining, 23 percent to distribution and marketing, and 11 percent to taxes. That month came before most of the widening shown above.

What we’re watching: the East-West Pipeline’s return to full flow, Russia’s export-ban decision, EIA’s weekly distillate inventories, EIA’s October Short-Term Energy Outlook, and the IEA’s October Oil Market Report.

Sources: EIA spot, retail and weekly supply data; EIA Gasoline and Diesel Fuel Update; EIA Short-Term Energy Outlook (Sept. 2026); IEA Oil Market Report (Sept. 2026); AAA; American Trucking Associations; American Farm Bureau Federation; Reuters; Bloomberg; NPR; Kyiv Post; The Moscow Times; Hydrocarbon Processing; Sabq; OilPrice.com.