Global Refining Crisis Threatens Sustained High Fuel Prices
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Global Refining Crisis Threatens Sustained High Fuel Prices
- The global oil refining industry faces severe constraints in 2026, with approximately 11 million barrels per day of global refining capacity estimated to be offline as of late July.
- This capacity shortage, exacerbated by geopolitical tensions including the Iran war and attacks on Russian refineries, has led to a significant increase in refining margins, with the US 3-2-1 crack spread reaching a record $70 per barrel on July 16.
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The global oil refining industry is currently experiencing a significant crisis, indicating that elevated diesel and gasoline prices may persist for an extended period. This situation is largely driven by a substantial shortage in refining capacity, which has become the critical bottleneck in the global fuel supply chain. As of late July 2026, an estimated 11 million barrels per day of global refining capacity was offline, a figure projected to fluctuate throughout the latter half of the year.
Geopolitical events, particularly the Iran war and attacks on Russian refineries, have severely impacted the refining sector. The conflict has knocked out over 20% of the Middle East’s 9.6 million barrels per day of refining capacity and restricted fuel exports through the Strait of Hormuz. This has led to a disconnect between crude oil prices and refined product costs, with Brent crude around $90 a barrel in mid-August 2026, but European diesel prices up over 70% and U.S. gasoline prices up around 60% since the start of the war.
The International Energy Agency (IEA) reported in May 2026 that global refinery crude throughputs were forecast to plunge by 4.5 million barrels per day in the second quarter of 2026. By August 2026, global refinery runs were approximately 7.5 million barrels per day below year-ago levels. This shortfall has resulted in record-high refining margins, with the US 3-2-1 crack spread reaching a record $70 per barrel on July 16, and refining margins roughly tripling since the beginning of 2026.
While some forecasts, like GasBuddy’s in January 2026, projected a national average gasoline price of $2.97 per gallon for 2026, down from 2025, and diesel at $3.55 per gallon, the escalating geopolitical tensions have introduced significant volatility. By March 2026, the national average for diesel reached $5.04 per gallon, and crude oil prices surged to around $111 per barrel by August 2026. This persistent crisis is expected to keep fuel prices elevated, impacting inflation and economic growth globally.