"Refining" has become a global energy bottleneck—how close is the U.S. to imposing an export ban?

This wave of investment doubled Middle Eastern diesel exports between 2017 and 2025, lifting the region’s share of global diesel exports to 19% and propelling it past North America to become the world’s largest diesel exporter. Over the same period, Russia upgraded existing refineries to boost its diesel exports by one-third. However, following the U.S.-Israeli joint military strike against Iran in February this year, traffic through the Strait of Hormuz was disrupted, forcing Kuwait, the UAE, and Iraq to sharply cut exports. Escalating Houthi attacks have further constrained diesel exports from Saudi Aramco’s Red Sea refineries—the primary alternative route bypassing the Strait of Hormuz. Meanwhile, Ukraine’s sustained drone strikes on Russian refineries have proven highly effective, nearly halting Russia’s diesel exports altogether. David Martin, Senior Oil Markets Analyst at the International Energy Agency (IEA), stated: “We are witnessing what may be the tightest diesel market ever recorded.” Western refining capacity insufficient to fill the supply gap Large-scale refining investments in the Middle East and Russia have long suppressed profit margins for Western refiners, leading to a persistent decline in capital investment—and leaving them ill-equipped to respond during this crisis. Alan Gelder, Senior Vice President for Refining, Chemicals, and Oil Markets at consultancy Wood Mackenzie, noted that when national oil companies build refineries, return on investment is often not the top priority; governments instead emphasize job creation and energy security. In contrast, Western major oil companies have not built a single new refinery in nearly thirty years, and over ten refineries in the U.S. and Europe have closed since 2015. Gelder remarked: “We’re seeing major oil companies actively reducing their exposure to this sector, as actual returns on capital have consistently been poor.” Gelder further cited a widely circulated industry quip: “How do you turn a large fortune into a small one? Build a refinery.” Currently, Western refineries are operating near full capacity and shifting production toward diesel—reducing gasoline and jet fuel output—but still cannot effectively offset the supply shortfall left by the Middle East and Russia. The export ban debate: easing domestic pain—or harming the globe? Soaring domestic fuel prices have intensified political calls in the U.S. for an export ban, adding uncertainty to this global supply博弈. This week, Trump attributed the primary cause of rising diesel prices to the Russia-Ukraine war, stating, “Global diesel price increases stem mainly from the Russia-Ukraine war—not Iran.” Yet IEA data shows diesel volumes blocked in the Persian Gulf are roughly three times larger than Russia’s supply shortfall—a clear discrepancy between the two assessments. Analysts warn that if the U.S. imposes a diesel export ban, prices elsewhere would surge further—and could prompt other major exporters to follow suit, worsening an already extremely tight global diesel market.

U.S. diesel crack spread surges past $106/bbl to a record high—Trump faces ‘midterm election shock’

On September 1, the U.S. diesel crack spread—the margin between diesel and crude oil prices—surged past $106 per barrel, setting a new all-time high. At the same time, retail diesel prices approached $5.63 per gallon. This energy crisis, triggered by the Iran war, is spreading across the entire economy—fueling inflation, depressing bond markets, dragging down equities—and, with less than two months until the midterm elections, mounting growing political pressure on the Trump administration. Soaring diesel prices directly impact agriculture, trucking, and winter heating demand—politically threatening the Republican Party’s core voter base in red states. On September 1, Trump urgently convened a White House meeting with major U.S. refiners—including Marathon Petroleum, Phillips 66, Chevron, Delek US Holdings, PBF Energy, and Valero Energy. According to insiders cited by the Financial Times, the meeting focused on expanding refining capacity and lowering fuel prices. Afterward, Trump posted on Truth Social pledging environmental waivers for small refineries and urging companies to ramp up output. Goldman Sachs promptly raised its 2027 forecast for U.S. diesel crack spreads from $27 to $63 per barrel; its forecast for European refiners rose from $19 to $49 per barrel. As Bloomberg reported, Goldman analysts wrote in their research note: “Ongoing disruptions to refining capacity in the Middle East and Russia have further squeezed an already strained global refining system, pushing refined product margins to successive record highs.” The U.S. diesel crack spread—the difference between refined diesel prices and crude oil prices—has breached $106 per barrel. Triple supply shocks make diesel the ‘epicenter of the crisis’ Diesel price surges stem from simultaneous breakdowns across three supply chains. First, the Iran war has effectively sealed off the Strait of Hormuz. Since the U.S.-Israeli initial strike against Iran at the end of February, refined product exports from the Persian Gulf have plummeted to about 40% of pre-war levels, while crude exports have fallen to just 70–80% of prior levels. According to Bloomberg, the U.S. launched another large-scale air raid on Iran on September 1, prompting the Islamic Revolutionary Guard Corps to warn of “severe retaliation.” Second, Russian refining capacity has clearly declined amid the ongoing Russia-Ukraine conflict. Third, Middle Eastern refineries have suffered damage. According to Goldman Sachs, global refinery shutdowns currently exceed seasonal averages by 60%; the IEA estimates Iranian attacks have taken offline nearly 3 million barrels per day of refining capacity. According to data from the American Petroleum Institute (API), overall global crude processing has dropped by approximately 5 million barrels per day compared to a year earlier. Diesel sits at the heart of this surge: since February, average global refined product wholesale prices have risen by $40 per barrel—and diesel alone accounts for over 40% of that increase. U.S. refiners operating at maximum capacity—but nearing their limits To cope with the supply shortfall, U.S. refiners are running at historically high intensity. Per data from the U.S. Energy Information Administration (EIA), U.S. refinery utilization rates remained at or above 95% for 12 consecutive weeks through the week ending August 21—the longest such streak since 2000. Last week, utilization rose further to 97.4%. The API reports that U.S. diesel production in July hit a record high for that month.

Chevron's Wirth Warns US Diesel Curbs Could Send Prices Higher

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Chevron CEO Mike Wirth warned that US diesel export bans could raise domestic prices and strain alliances, though President Trump rejected the proposal. He also highlighted growing global oil demand and Chevron's potential participation in an Iraq-to-Mediterranean pipeline project.

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