A 5-6% global refining shortage translates to a nearly 20% deficit in the smaller 8 million barrel-a-day seaborne traded market. This disproportionate impact on the price-setting segment of the market explains the extreme price spikes and volatility.
The "crack spread," or the refiner's margin over the cost of crude oil, has skyrocketed from a typical $20 to an unprecedented $100 per barrel. This demonstrates that a severe shortage of refining capacity, not just the price of oil, is the primary driver of high diesel prices.
Refineries are built with a fixed configuration to process specific crude oils into a set mix of products. They can run at full capacity, but their ability to adjust the yield of diesel versus other fuels like gasoline is minimal, typically only by a few percentage points.
Even at historic highs of $200 per barrel, significant demand destruction for diesel hasn't materialized outside of China. Consumers are delaying purchases by using private inventories or simply absorbing the cost for this indispensable fuel, challenging classic economic models.
A ban would quickly fill diesel storage, forcing refineries to cut overall production. Because refineries produce a fixed mix of fuels, this would also reduce gasoline output. In a balanced market like the U.S., this would create a gasoline shortage and drive its price higher.