Sylvie Willis
Diesel fuel prices have been on a rollercoaster ride in recent years, with a global fuel shortage in 2022 causing prices to soar. This was driven by a combination of factors, including low refining capacity, low import levels, and tight supply. The conflict between Russia and Ukraine also played a significant role in the volatility of diesel prices, with tensions and the invasion itself contributing to wholesale energy price increases. While prices dipped in the latter half of 2024, they are primarily determined by the cost of crude oil, which regularly accounts for around 50% of end consumer prices. With fuel demand expected to increase in the coming years, experts predict more price volatility.
| Characteristics | Values |
|---|---|
| Diesel fuel prices | Reached a record high of 151.57p per litre in the UK in February 2022 |
| Northwest European diesel cargo prices reached $114/bbl in March 2022 | |
| Asian diesel prices for the benchmark 10ppm gasoil reached their highest since September 2014 | |
| In December 2024, one gallon of diesel cost an average of $3.49 in the US | |
| Diesel demand | Improving in Northwest Europe |
| Expected to increase in the next 10-15 years | |
| Diesel supply | Lower refining capacity in Northwest Europe compared to pre-COVID levels |
| Low import levels in Northwest Europe | |
| Supply gap left by China's clampdown on refined product exports | |
| European supplies pushed the region's six-month diesel spread to more than $100 a tonne | |
| Diesel output | Requires faster-than-normal crude processing rates at refineries |
| Diesel price determinants | Cost of crude oil, which regularly accounts for around 50% of end consumer prices |
| Supply restrictions or weak demand outlooks |
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What You'll Learn
Diesel fuel prices
In March 2022, Northwest European diesel cargo prices reached $114/bbl, the highest since September 2014. The low refining capacity compared to pre-COVID levels and low import levels put severe pressure on the market. The global oil refining complex is under strain, with capacity falling for the first time in 30 years as closures outweigh new additions.
In June 2025, diesel prices in the Philippines surged for the third consecutive week, with net increases reaching a new high of almost P7 per liter. Geopolitical unrest, including the conflict between Israel and Iran, has been a significant driver of these price hikes.
The cost of crude oil is the most significant factor influencing diesel prices in the long term. Political volatility in oil-producing regions, particularly in the Middle East, has historically impacted crude oil prices. Taxation also makes up a significant component of diesel prices, varying from country to country.
With fuel demand expected to increase in the next 10-15 years, supply constraints, and market dynamics, diesel prices are likely to remain volatile.
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Global diesel fuel shortage
The global diesel fuel market is facing a significant shortage, causing a ripple effect of challenges across various industries and impacting the quality of life worldwide. This shortage is not an isolated issue but is interconnected with the complex dynamics of the global oil market. Here are some key factors contributing to the global diesel fuel shortage:
Reduced Oil Production:
The Organization of Petroleum Exporting Countries (OPEC) and Saudi Arabia implemented crude oil production cuts, leading to lower overall oil production. These production cuts have directly affected the availability of diesel fuel. Middle Eastern exporters' production cuts disproportionately impact the diesel market because their crude oils yield a higher proportion of middle distillates, including diesel, when refined.
Post-Pandemic Demand Surge:
The COVID-19 pandemic caused a slowdown in oil production and diesel deliveries. As the world recovered from the pandemic, demand for diesel fuel increased, particularly with the rebound in manufacturing and exports. However, it took time for diesel production to catch up with demand due to operational suspensions and labor shortages.
Supply Chain Disruptions:
The diesel fuel shortage is impacting supply chains across nearly every industry. Diesel engines power agricultural equipment, construction machinery, farming equipment, military equipment, and vehicles used for transportation. The shortage has led to higher shipping costs, causing further delays and bottlenecks.
Geopolitical Factors:
Geopolitical tensions, such as the war in Ukraine and the conflict between Israel and Iran, have contributed to the diesel fuel shortage. The invasion of Ukraine led to a rapid increase in diesel prices, and there are concerns that a full-scale conflict between Israel and Iran could block a critical oil corridor, further driving up prices.
Refining Capacity Constraints:
There is a global shortage of refining capacity to turn crude oil into diesel and other middle distillates. This constraint is particularly notable in Europe and North America. As a result, refining margins have increased, contributing to the surge in diesel prices.
Impact on Farmers and Food Supply:
Farmers rely on diesel to grow, harvest, and transport crops. The diesel shortage has disrupted the food supply chain, with farmers facing challenges in getting their products to market. This disruption has led to higher shipping costs and, ultimately, higher consumer prices.
The global diesel fuel shortage has far-reaching consequences, affecting industries, economies, and individuals worldwide. Addressing this complex issue requires a multifaceted approach, including optimizing supply chains, exploring alternative opportunities, and adapting to changing demands.
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Diesel demand in Europe
Diesel fuel demand in Europe has been affected by several factors in recent years. One significant factor is the global fuel shortage that occurred in 2022, which impacted the availability and pricing of diesel in the region. The loss of Russian supply due to the invasion of Ukraine also contributed to elevated diesel prices and tight supply in Europe.
In terms of consumption, diesel oil overtook motor gasoline as the most used fuel in Europe in 1998. In 2018, almost three times as much diesel was consumed for transport compared to gasoline. This trend has been influenced by factors such as structural changes in the economy, more efficient use of oil products, and transport substitution by biofuels or electricity.
The demand for diesel in Europe has been declining in recent years, leading to a decrease in refining capacity. Major companies such as TotalEnergies, Shell, and ExxonMobil have reduced their investments in European refining assets. This has resulted in the closure of some refineries, such as the Grangemouth refinery in Scotland, which removed 13% of the UK's refining capacity.
However, despite the overall falling demand for fuels, European refiners have been able to reap extraordinary profits due to tight diesel supply and frequent outages. The forecast recovery of European economic growth in 2024 could further increase demand and push margins higher.
The diesel supply in Europe is expected to remain tight, and without political rapprochement with Russia, supply lines will continue to be long and unreliable. This could result in higher diesel prices and margins in the region.
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Diesel prices in the US
In the lead-up to 2025, the global fuel market experienced a shortage that spread to diesel after impacting oil, gas, and coal. This shortage resulted from tightening supplies and increasing fuel demand, which outpaced the available supply. The strain on the global oil refining complex, with capacity falling, contributed to the challenges. As a result, diesel prices surged in 2021 and 2022, with prices in Northwest Europe reaching $114 per barrel in February 2022, the highest since September 2014.
The conflict between Israel and Iran has also impacted oil prices globally. While commodity prices dropped as of Tuesday, a full-scale conflict could block the Strait of Hormuz, an oil corridor for about 20% of global crude oil. This blockage could cause oil prices to soar to $120-$130 per barrel, as witnessed after Russia's invasion of Ukraine. However, as of June 2025, the strait remains open, and oil prices are below the peak levels seen earlier in the year.
In the US, diesel fuel prices are released weekly by the U.S. Energy Information Administration (EIA). As of June 24, 2025, the average regular gas price in the US was $3.224 per gallon, according to AAA. These prices are expected to rise further due to various factors, including new tariffs and auto tariffs, which will impact both new and used car prices.
The US president can influence diesel prices by enacting policies that encourage low fuel prices. However, fuel demand is projected to increase in the next 10–15 years, and supply may struggle to keep up, leading to anticipated price volatility.
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$136.78
Diesel vs gasoline
The global fuel shortage that began in 2022 has impacted diesel supplies, with prices rising in Europe and Asia. This has been driven by lower refining capacity and low import levels. Diesel fuel demand is expected to increase in the coming years, which may lead to further price volatility.
Now, comparing diesel and gasoline, or petrol, there are several key differences. Firstly, diesel engines do not use spark plugs for ignition like gasoline engines. Instead, they use extreme compression to generate heat for spontaneous ignition, also known as compression ignition. This makes diesel engines more efficient, especially on highways, as they have higher torque and better fuel economy. However, diesel engines are less efficient for city driving and have a higher upfront cost.
In terms of pricing, diesel fuel typically costs more per gallon than gasoline, but it offers better mileage. This means that while diesel may be more cost-effective for those driving many highway miles annually, it may not make financial sense for those driving fewer than 10,000 miles per year or mostly driving in cities. Additionally, diesel fuel prices can be influenced by local regulations and demand, with diesel often being taxed higher than gasoline in some regions, including most states in the US.
From a production standpoint, diesel is cheaper and simpler to refine than gasoline. However, diesel engines have lower production volumes and are made for specific engines, contributing to higher costs for engine parts and maintenance.
Overall, the choice between diesel and gasoline depends on various factors, including driving habits, vehicle preferences, and regional pricing and regulations. While diesel may offer improved efficiency and performance, particularly for highway driving, it may not be the most cost-effective option for all drivers.
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Frequently asked questions
Diesel fuel prices are influenced by the cost of crude oil, which regularly accounts for around 50% of end consumer prices. Other factors include supply restrictions, demand outlooks, and tensions between countries.
The conflict between Russia and Ukraine caused tensions that led to a rise in wholesale energy prices, which in turn drove up diesel fuel prices.
Diesel fuel prices have fluctuated over time, with highs and lows. For example, in February 2022, diesel fuel prices reached a record high of 151.57p a litre in the UK. In December 2024, diesel fuel prices in the US decreased to $3.49 per gallon, the lowest price in the previous 24 months.
It is expected that fuel demand will increase in the next 10-15 years, while supply may struggle to keep up. This imbalance could lead to more volatility in diesel fuel prices.
