Global gasoline shortage emerges as refining capacity lags behind oil supply

Oil shipments through the Strait of Hormuz have increased, adding roughly 200 million barrels to global supplies in recent weeks, but the world’s ability to turn crude into gasoline and diesel remains limited. Refiners are processing about 8.4 million fewer barrels of crude per day than before the conflict began, a shortfall that translates into roughly 10 % less fuel output, according to Natasha Kaneva, head of global commodities research at JPMorgan.

"The question is no longer whether crude barrels will return, but how quickly the global refining system can process them," Kaneva said.

The shortfall reflects damage to Middle-Eastern refineries, attacks on facilities in the region, and disruptions caused by extreme temperatures that affect distillation processes. In addition, Ukraine’s attacks on Russian energy sites have reduced Russian diesel exports, further tightening the market.

China has cut refinery runs by about 3 million barrels per day as it shifted production toward coal-fired power and electric vehicles, depleting its emergency oil reserves and limiting gasoline and diesel exports to neighboring countries. Analysts expect Chinese refining to resume only after assurances that oil can move freely through the Hormuz corridor.

U.S. refineries have increased output of jet fuel and diesel to meet overseas demand, which has constrained domestic gasoline supplies and kept pump prices higher than some officials anticipated. The United States has not built a new large refinery since 1977, and several California plants have closed in recent years due to regulatory and cost pressures.

Russia, a major diesel exporter, halted diesel shipments after Ukrainian drone attacks damaged its refineries, contributing to a 20 % rise in diesel futures over the past three weeks. The loss of Russian diesel, which previously accounted for about 12 % of global diesel shipments, is expected to keep fuel prices elevated even as crude oil flows improve.

"Even as market attention remains understandably fixed on Hormuz, one of the most important determinants of global refining balances may now lie nearly 2,000 miles to the north," Kaneva added.