Diesel Prices Surge on Geopolitical Tensions: Russia and Hormuz Risk
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The signal
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. 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.
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.
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.
Frequently Asked Questions
What This Means for Your Supply Chain
What if diesel prices remain $0.60–$0.80/gallon above pre-war baseline for 6 months?
Model scenario where ULSD futures settle at $3.80–$4.00/gallon (vs. pre-war $2.60/gallon baseline) for a 6-month period due to sustained Russian refinery outages and Strait of Hormuz volatility. Apply fuel surcharge increases to all transportation costs. Recalculate landed cost of goods, carrier profitability, and freight cost per unit shipped across key routes.
Run this scenarioWhat if Strait of Hormuz transit delays add 2–4 weeks to Asia-to-US shipping times?
Model scenario where vessel queuing, reduced traffic throughput, and insurance/security slowdowns at Strait of Hormuz add 14–28 days to median transit time for ocean freight from Middle East and South Asia to North America. Assess impact on inventory-in-transit, safety stock requirements, and delivery commitments for time-sensitive shipments.
Run this scenarioWhat if Russian diesel remains offline for 12+ months, forcing Europe to source alternative suppliers?
Model structural supply loss scenario where Russian diesel export capacity recovers minimally (remains below 200,000 b/d) for 12+ months due to sustained warfare infrastructure damage. European logistics operators must source diesel from US, Middle East, or other Atlantic sources at premium prices and longer lead times. Model alternative sourcing economics and regional price divergence.
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