Fuel Refineries Eye Record Profits as Households and Businesses Face Diesel Shortages

The global diesel squeeze is creating a widening divide across the refining industry, with some producers benefiting from record margins while others face losses as crude oil and tanker costs surge.

The imbalance matters beyond energy company earnings: diesel is essential to freight, agriculture, and industry, meaning prolonged supply constraints can feed into prices across the wider economy.

The International Energy Agency (IEA) warned in its October 2026 Oil Market Report that diesel markets could remain tight well into 2027, despite an expected recovery in refinery output. The outlook highlights a problem for the industry: producing more fuel does not necessarily mean every refinery can profit, particularly when the cost of obtaining and transporting crude rises faster than the value of some products.

Record Diesel Margins Mask a Refining Divide

Diesel refining margins, which measure the premium of diesel prices over crude oil, reached almost $95 (£72) a barrel in September, according to the IEA. Reduced refining capacity and disrupted supplies helped push the fuel's value sharply higher.

But the gains are uneven. In the United States, access to domestic crude has helped support refining margins. In Europe and parts of Asia, refiners have faced steep increases in the cost of physical crude and hiring supertankers, while petrol, naphtha, and other products have not risen in value at the same pace.

In north-west Europe, refinery margins fell from $54 (£41) a barrel at the start of September to minus $11 (about minus £8) on 5 October, before recovering to around $3 (£2) a barrel, according to market data reported on 14 October. These figures show why exceptionally high diesel prices do not automatically translate into record profits for every refinery.

The distinction is important: a refining margin is not the same as a company's net profit. Overall earnings also depend on operating expenses, the mix of products sold, maintenance costs, and other parts of an energy company's business.

Supply Disruptions Are Raising Wider Economic Costs

The pressure on refineries reflects a wider shortage of middle distillates, a category that includes diesel, gasoil, and jet fuel. The IEA estimated that global diesel and gasoil availability fell by 1.5 million barrels a day in the second quarter of 2026 and 1.7 million barrels a day in the third quarter compared with a year earlier.

Combined net exports from Russia and the Middle East fell by 1.3 million barrels a day year on year in September, to 820,000 barrels a day, according to the agency. Higher supplies from other exporters only partly offset the decline. The consequences extend beyond fuel companies. Diesel powers much of the freight and machinery used to move goods, harvest crops and support construction. Higher fuel bills can raise operating costs for businesses, with some of that pressure potentially passed on to customers through more expensive goods and services.

The IEA said record diesel prices were already affecting real incomes, economic activity, and inflation. It also expects global oil demand to fall by 2.6 million barrels a day on average in 2026, with diesel accounting for around a quarter of that decline.

A 2027 Surplus May Not Bring Immediate Relief

Higher refinery output is expected to return the global diesel and gasoil market to surplus in the first quarter of 2027. However, the IEA cautioned that this would not be enough to make up for the supply deficit accumulated during 2026. It expects the market balance to remain tight well into next year, with a more meaningful easing dependent on a recovery in supplies from the Middle East.

The outlook also leaves refiners with a difficult production decision. Plants may try to maximise output of high-value diesel and jet fuel, but they have limited flexibility in the mix of products obtained from each barrel of crude. If weak margins for other products make operations uneconomic, some refineries could cut output, adding further pressure to supply.

A petrol shortage is not established by the IEA's forecast and should not be treated as inevitable. The more immediate concern is that tight diesel supplies, depleted inventories, and high transport costs could persist even as refinery production recovers.

For households and businesses, the timing of relief will depend not only on how much fuel refineries produce, but also on whether disrupted exports recover and the cost of moving crude and finished products falls.