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The global diesel shortage is driven by severe disruptions across four regions that normally control 50% of the world’s diesel exports. Because of military strikes, political bans, and shipping blockades, over 25% of the entire global diesel export pipeline is essentially blocked. This means one-quarter of the fuel usually traded worldwide has vanished from the market.

In the Middle East, something approaching 10% of global supply has been knocked out. While the region normally commands a 19% share of global diesel exports, recent conflicts and the closure of the Strait of Hormuz have crippled operations. Combined with missile damage to critical refineries, regional fuel exports have been slashed nearly in half, forcing the Middle East to run at just under 60% of its normal capacity. This has heavily choked off the main fuel supplies heading to Europe and Asia.

Next up is Europe’s war with Russia. European strikes on Russian infrastructure have knocked back another roughly 10% of global supply. Russia typically holds an 11% share of global exports, but successful drone strikes targeted and disabled nearly 30% of its total national refining capacity. To protect its own economy from running dry, Russia banned diesel exports entirely, causing its international fuel shipments to plummet by 80% and completely cutting off its standard Black Sea trade routes.

The balance of the 25% of compromised global supply arises from maxed-out refining capacity. The rest of the world cannot fix the supply deficit because the remaining major producers are maxed out or restricting trade. North America controls 15% of the export market, but its refineries are already pushed to their absolute limits, operating at 96% to 98% utilisation with no extra buffer to increase production. Meanwhile, China has strictly rationed its 5% export share using government quotas to keep fuel at home, leaving global buyers with nowhere else to turn.

There is not much South Africa can do about this on its own terms because counterproductive government energy policy has knocked out much of the refining capacity the country might have had.

The near R32/litre price that will be announced this Wednesday will be the highest price, in both nominal and inflation-adjusted terms, that South Africa has seen. That is shown on the chart below.

Bheki Mahlobo told The Common Sense, “Prices at these levels are so far above the inflation-adjusted averages that the South African economy is geared to withstand that the consequences will be to drive steep price increases in goods and services and almost ensure that the South African Reserve Bank hikes rates again by year-end.”

American President Donald Trump has said he will pressure Europe to release diesel reserves to help stem price increases, but the extent to which this will help to secure consumer relief will likely be limited.

Frans Cronje told The Common Sense, “It’s a tough thing to say but Western governments have created this problem, firstly via the NATO bloc continuing to drive a ruinous war effort against Russia long after a peace pact should have been secured, America ill-advisedly going back into Iran after its late June exit of sorts, and then broader Western climate policy, which has so stunted global oil and gas production and refining capacity.”