Diesel prices are surging. Ukraine is only part of the story

Even if you don't fill your own vehicle with diesel, its price has a big impact on your life.

While petrol is primarily a consumer fuel for cars, diesel is vital in powering much of the wider economy, from freight transport and farming equipment to construction and industry.

That is why diesel shortages or price shocks can have a bigger economic impact than higher petrol prices by raising the cost of moving goods and operating heavy machinery.

As businesses become strained, these higher energy costs will be passed on to consumers and add to a growing cost-of-living crisis and inflation. So what's driving global diesel prices higher?

The US blames Ukraine for diesel shortages

The United States and China are among the world's largest producers of diesel fuel. China keeps a lot of it for domestic use, so that leaves the US as the world's biggest diesel exporter.

Still, the weekly average price of a gallon of diesel is now $6.52 (€5.73) in the country, according to the US Energy Information Administration, a big increase from a year ago when it averaged $3.74 a gallon or two years ago when it averaged $3.53 a gallon.

President Donald Trump recently called on Ukraine's president to stop targeting oil refineries in Russia "because he's causing a shortage of diesel."

Russia is one of the world's other biggest diesel suppliers. But since 2022, some of its oilrefineries have been attacked as many as 15 times, according to the International Energy Agency.

The agency estimates that diesel production in Russia is down by nearly 30% from 2025 levels. Now Moscow has restricted diesel exports to protect domestic supplies.

As Russian production declined, the US went into high gear to help make up the difference, but even this was not enough. And on September 22, Trump announced that his administration was also considering a diesel export ban.  

Such a move is likely an attempt to bring down domestic prices ahead of the November midterm elections since energy prices and affordability have become important campaign issues.

Leading energy lobby groups have come out against such a plan, and many industry experts think a ban would be slow to bring down prices or could backfire by pushing US refiners to reduce production, push up prices, or both.

Europe is especially vulnerable to diesel shocks

For Europe, the consequences of more expensive diesel could be dramatic.

"Decades of policy incentives, such as tax advantages, left Europe's vehicle fleet far more diesel-heavy than regions like the US," said Georg Zachmann, a senior fellow at Brussels-based Bruegel think tank.

"As a result, the EU is structurally long on gasoline, which it exports, and short on diesel, which it must import," added Zachmann, who specializes in energy and climate policies.

In the EU, just over 38% of passenger cars are diesel and road transport, including freight, makes up 77% of total diesel and gas oil consumption, according to a briefing published by Transport & Environment, a Brussels-based advocacy group.

This reliance on diesel-powered transport "leaves drivers and businesses particularly exposed to oil and fuel price shocks," wrote Juliette Egal, the briefing's lead author.

The NGO calculated that EU drivers are paying €30 more for a 50-liter tank of diesel on average since the start of the war in Iran. An average German long-haul truck driver is paying an extra €236 a week.

Increased fuel costs for EU road transport add up to €270 million a day — of that, €203 million is for diesel, according to the briefing. Overall, the EU economy has seen additional costs of €40 billion from road diesel since the beginning of the war. 

Why are diesel prices climbing faster than oil?

In the near term, Russia's crude oil processing volumes are the single fastest-moving lever, said Skip York, a nonresident fellow at Rice University's Center for Energy Studies in Houston, Texas.

"Each new wave of Ukrainian strikes shows up in diesel prices within days, unlike Hormuz, which has been running at a depressed but relatively stable flow rate for months," he added. 

Why Iran fuel crisis hits different in Europe than the US

Perhaps surprisingly, crude oil production — the raw material needed to make diesel and gasoline — isn't the biggest constraint, York pointed out, which is why oil prices have moved modestly while diesel has soared.

"The oil bottleneck has shifted from 'not enough crude' in March/April to 'not enough refining capacity' since August," the expert told DW.

Now refinery disruptions matter most, he said, because "both the Ukraine drone campaign and the Hormuz conflict are knocking out working refining capacity faster than anyone can replace it." 

Still, the Strait of Hormuz "is the bigger structural risk" for diesel prices in the long term.

Globally, refinery capacity has "dropped substantially, and diesel is particularly affected," agreed Zachmann.

Where will diesel prices go from here?

Prolonged fighting in the Middle East or Russia could add to the problems for Europe and other diesel users. US export restrictions could make this situation even worse.

US diesel exports to Europe are up around 37% since last year and now account for about 8% of European demand, says York. This makes the country an important alternative to diesel from Russia and the Persian Gulf.

If the US blocks exports, it would be a big shock and mean even higher diesel prices, said Zachmann. The question is whether the EU would retaliate and export less gasoline to the US "making both sides worse off" by pushing up both US gasoline prices and EU diesel prices.

Is Europe prepared for its next major energy shock?

Additionally, winter is just around the corner for the Northern Hemisphere. Refineries may struggle to meet demand for both heating oil and diesel, further tightening supplies.

A wave of refinery closures in Europe and the US since 2019 has made the diesel market vulnerable, said York, and this has hit the buffer of spare refining capacity that used to absorb shocks.

"Essentially, the market has fewer 'extra barrels' standing by," he underscored. "So, the loss of any barrel hits supply much more directly than it used to."