Diesel Prices Surge on Geopolitical Tensions: Russia and Hormuz Risk

Diesel prices are accelerating upward after nine weeks of declines, driven by two converging supply shocks: Ukrainian drone strikes crippling Russian refinery capacity and escalating military activity threatening the Strait of Hormuz. Ultra low sulfur diesel (ULSD) futures jumped over 20% in six trading days, rising from $3.18/gallon to $3.82/gallon, with intraday peaks exceeding $4.00/gallon. This represents the tightest supply conditions since the Russia-Ukraine war began in February 2022. The Russian refinery crisis is severe and structural.

According to analytics firm Kpler, Russian refinery runs have fallen to 21-year lows at 3.8 million barrels per day, with approximately 4.3 million b/d of capacity offline due to Ukrainian attacks on at least 25 refineries. Most critically, Russian diesel exports have collapsed from historically over 1 million b/d to just 270,000 b/d last week, with further declines expected. Russia's export ban remains in place, eliminating this historical supply cushion from global markets. The Strait of Hormuz uncertainty compounds the crisis.

With traffic drastically slowed and shipping costs volatile, the diesel-to-crude spread has widened to approximately $1.84/gallon, among the highest levels since the war began, compared to just 87 cents/gallon before February 2022. For supply chain professionals managing fuel surcharges, this volatility signals sustained upward pressure on transportation costs with limited near-term relief, necessitating urgent reassessment of logistics budgets and carrier negotiations.