Why are diesel prices and oil prices (Brent and West Texas Intermediate crude) drifting so far apart? This is no trivial matter, since what hits consumers in the pocket every time they fill up is the price of diesel.
Refining margins have reached record highs, with diesel futures in Europe trading at a record premium to Brent crude.
The refining margin (commonly known as the crack spread) is the difference between the cost of crude oil (the raw material) and the selling value of the refined products obtained from it (such as diesel, petrol or kerosene). In simple terms, it is the gross profit a refinery earns by turning a barrel of crude into fuel ready for consumption.
Typically, in stable market conditions, this margin tends to fluctuate between 3 and 7 dollars per barrel. However, diesel futures in Europe are trading at a record premium, or spread, that has exceeded 100 dollars per barrel above Brent crude.
This historic disconnect, in which diesel is rising in price dramatically faster than crude itself, is due to a severe industrial and geopolitical bottleneck caused by several structural factors:
The market is suffering from a physical shortage of operational refineries capable of meeting European demand. Drone attacks on key refining infrastructure in Russia as well as blockades and prolonged logistical disruption stemming from the conflict in the Middle East have removed millions of barrels per day of processing capacity from the global market. With enough crude oil but too few operational plants to process it, the diesel available has become scarce and expensive.
Historically, Europe relied on massive imports of low-cost Russian diesel, thanks to its proximity and pipeline infrastructure. With embargoes and trade sanctions in place, the European Union has been forced to source diesel in much more distant markets such as the US, India and South Korea. This drives up logistics costs and maritime freight rates, and also forces Europe to compete directly on price against Asian buyers.
Strategic distillate reserves in the West are at their lowest levels in more than a decade. The futures market is trading at a steep premium amid fears that available capacity will not be enough to cover heating and heavy goods transport during the coldest months of the year.
In the face of rising global energy costs, the US has considered imposing bans or restrictions on its own diesel exports to protect domestic prices. As the US now supplies over 50% of Europe’s diesel import needs, the mere fear of a US ban has injected an additional risk premium into diesel futures in Europe.
This last point is decisive for financial assets: rising inflation is a reality. From an inflation perspective, diesel consumed by eurozone consumers accounts for approximately 1.5% of the CPI basket. In other words, if the price of diesel were to double, the eurozone CPI would rise, and very quickly, by 1.5%. Central banks adjust their messaging according to how they expect inflation to evolve, and financial assets react to changes in interest rates.
The price of oil, and in this case its refined products, diesel among them, is what sets the direction, and it has never mattered so much. Lately it has been a headache for investors. However, the very risk of rising inflation, driven by consumer spending, can at the same time act as a brake on the oil price, since demand has proved to be somewhat elastic.
Markets in general have been hurt by the rise in the price of oil and its refined products. But we can end on a hopeful note: it may be that being “the thing to watch” will itself put a ceiling on the oil price, since a solution will have to be found.
Date of report: October 9th of 2026