Global Diesel Shortage Could Last Until 2027, Warns International Energy Agency

The global diesel shortage is projected to continue into 2027, driven by the ongoing conflicts in Ukraine and Iran, according to a warning from the International Energy Agency (IAE). This prolonged scarcity is expected to lead to persistently high fuel prices and potentially slow economic growth worldwide.

In September, the combined loss of diesel exports from the Middle East and Russia reached 1.3 million barrels per day, representing approximately 4.5% of the global demand forecasted for the year, the IAE reported. The agency noted that record diesel prices are already exerting broad economic consequences by increasing the cost of goods, impacting real incomes, and contributing to inflation.

"As the remaining buffers in the system continue to erode, in the absence of a resolution to the conflicts in the Middle East, oil markets may experience more turmoil in the months ahead before any eventual surplus emerges in 2027," the IEA stated. Even with anticipated increases in global refinery operations later in the year, the agency cautioned that this would be insufficient to fully compensate for the current deficits in diesel, gasoil, and jet fuel markets.

The supply squeeze is predicted to remain significant through the first half of 2027, with only the latter half of the year showing signs of easing. This outlook comes as IAE members are scheduled to convene to discuss potential releases from emergency oil reserves, from which approximately 331 million barrels have already been distributed.

Mobilizing an oil tanker.

Diesel fuel is a critical component for various sectors, including industry, agriculture, and transportation, making its elevated prices a source of political and economic pressure globally. In the United States, diesel prices hit a record high of $6.52 per gallon last month, with prices remaining stubbornly elevated.

Efforts to address the shortage have included discussions of releasing more oil from strategic reserves. At one point, President Trump had reportedly threatened a U.S. diesel export ban against the European Union if it did not agree to release an additional 100 million barrels of diesel and crude oil from its strategic reserves. Trump has also reportedly pushed to lift sanctions on Russia to acquire more diesel for U.S. and global markets, a move that faced criticism for potentially aiding Moscow.

While a temporary energy cease-fire has been in place, Ukraine has indicated it would resume attacks on Russian oil refineries if Moscow continued to violate the truce. The situation in the Middle East has further complicated diesel supplies, with increased attacks on tankers in the Strait of Hormuz and threats to energy infrastructure by Iran-backed Houthi rebels potentially undermining recent recoveries in crude exports.

"The recent escalation in attacks on regional energy infrastructure and tanker traffic is threatening to derail further gains," the IAE warned.