Hormuz Supply Crisis to Change LNG Market Forever

By Tsvetana Paraskova - Sep 23, 2026

• The Hormuz crisis has effectively made around 20% of global LNG supply “interruptible,” pushing buyers to prioritize security and geographic diversification.
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• Europe and Asia are seeking LNG beyond the Gulf, boosting interest in projects in Canada, Mozambique, Indonesia, Papua New Guinea and Argentina.
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• The crisis is reshaping energy strategies beyond LNG, with importers diversifying fuels, routes and contracts while countries such as Thailand accelerate renewables to reduce gas dependence.

The Strait of Hormuz crisis has turned roughly 20% of global LNG supply into something buyers now have to treat as interruptible.

Nearly seven months after traffic through the strait collapsed, LNG exports from Qatar and the UAE remain severely constrained. Buyers in Europe and Asia are responding by looking for supply that does not depend on Hormuz at all—from Canada, Mozambique, Indonesia, Papua New Guinea and Argentina—and reconsidering how much of their future gas demand they are willing to tie to a single export route.

The war has changed the near-term outlook and sent LNG prices in Asia and Europe soaring to the highs last seen in the 2022 crisis. Europe is hard-pressed for supply ahead of winter, while price-sensitive buyers in Asia are scrambling for alternatives, burning more coal, and boosting renewable energy generation targets to avoid supply crunches and hefty gas import bills when the next crisis hits the energy market.

Diversification Drive

The current crisis goes well beyond the concerns about winter supply in Europe or how high prices in Asia destroy demand. The war and the Strait of Hormuz supply crunch have undermined the decade-old belief among buyers that relying on cheap fixed-term supply from one or two sources is enough.Related: Saudi Arabia Restarts East-West Oil Pipeline

“The market seems now to be viewing the 20% of global supply behind the straits as ‘interruptible’ – even if it does return, it could easily be constrained again, feeding market volatility and further complicating contracting decisions,” Wood Mackenzie analysts said about their conversations with LNG leaders at the Gastech 2026 conference in Bangkok earlier this month.

“An important consequence is that the value of more reliable supply has increased,” WoodMac’s analysts say.

Following the halt to LNG shipments from the Strait of Hormuz for months, buyers have started to think about energy security more than anything else and are busy diversifying their sources of supply.

European buyers started exploring purchases from Canada after it became clear in April that U.S.-Iran ceasefires aren’t bringing back Qatar’s supply to the market.

China’s giant state LNG importers are reportedly in talks to secure long-term LNG supplies from exporters that don’t need the Strait of Hormuz, as the world’s biggest LNG buyer seeks to reduce its exposure to gas deliveries from the Persian Gulf.

China is the top LNG customer of Qatar, and it sourced nearly 30% of its LNG supply from the Gulf exporter last year.

Some of China’s state-controlled majors have signed long-term deals in recent years with Qatar in exchange for minority stakes in some of the expansion projects of the Gulf producer, part of which will be delayed due to the war.

But Beijing is exploring options to reduce its exposure to Gulf supply. Some of the biggest Chinese LNG buyers, including PetroChina and Sinopec, are in talks with exporters for potential deliveries starting before 2030 for a period of at least ten years, sources familiar with the plans told Bloomberg in July.

The global drive among buyers to secure LNG supply that’s not threatened by geopolitically charged chokepoints is strengthening the case for LNG projects in Mozambique, Timor-Leste, Indonesia, Papua New Guinea, Argentina, and Canada to move forward.

“Buyers, governments and export credit agencies are increasingly supportive of this supply diversification as they push for energy security, though the set of risks these projects carry remains an obstacle for some,” WoodMac said.

Priorities Realigned

But energy importers are diversifying not only their source of supply. They will be increasingly looking to diversify “among fuels, energies, delivery entry points, shipping access, technologies, and contract and price structures,” Leslie Palti-Guzman, a senior associate (non-resident) with the Energy Security and Climate Change Program at the Washington-based Center for Strategic and International Studies, said last month.

The Western Hemisphere, especially the West Coast of North America, is gaining prominence as a new source of LNG supply in stable jurisdictions such as Canada and Mexico, according to Palti-Guzman. Such supply has direct access to Asia without the need to use any of the chokepoints: the Strait of Hormuz, the Panama Canal, the Suez Canal, or the Straits of Malacca.

Qatar’s LNG supply will recover eventually and could position the Gulf state as a winner in the long term. However, the recovery and the faith buyers will have in continued access to the Qatari supply will depend on uninterrupted navigability of the Strait of Hormuz and Qatar’s relationship with Iran, Palti-Guzman said.

Buyers nevertheless are now open to exploring LNG supply that’s not coming from Qatar and the U.S., to diversify energy sources and hedge against the risk of depending on a limited number of supply options.

Some LNG importers in Southeast Asia, which have relied on Qatar for too much for too long, have moved to accelerate their renewable energy buildout to boost the share of solar power in their electricity mix and reduce dependence on gas imports.

Thailand, for example, is launching a public solar power scheme of 10 gigawatts (GW) that would cover about 1 million households. The rooftop solar panels are expected to reduce Thailand’s massive reliance on gas for electricity generation.

Thailand needs to diversify its energy sources “because otherwise we’ll be subjected to what’s happening in the Middle East forever,” Energy Minister Akanat Promphan said in comments to the solar scheme, as carried by the Financial Times.

By Tsvetana Paraskova for Oilprice.com

Hormuz Crisis to Push Global Coal Demand to Record High

By Felicity Bradstock - Sep 20, 2026

• Global coal demand is forecast to rise 1.2% to a record 8.94 billion tonnes in 2026, with Chinese demand reaching about 5 billion tonnes and Indian demand 1.353 billion tonnes.
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• Higher gas prices caused by reduced LNG flows through Hormuz are encouraging gas-to-coal switching, while strong El Niño conditions are adding cooling demand and reducing hydropower availability.
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• The United States is an exception: the IEA expects U.S. coal demand to decline about 7% in 2026, despite policy support for the sector.
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The International Energy Agency expects coal demand to increase this year in response to ongoing oil and gas trade constraints stemming from the closure of the Strait of Hormuz. Several countries have been forced to turn back to coal to fill the gap, as oil inventories are depleted and countries gradually expand their renewable energy capacity.

In its mid-year update, the IEA predicted that coal use would likely increase in some regions of the world owing to higher natural gas prices in 2026. The conflict in the Middle East and ongoing restrictions on trade via the Strait of Hormuz maritime trade corridor have driven up prices in recent months. This has led to severe global energy disruptions, pushing oil and gas prices higher.

The massive reduction in LNG shipments through the Strait of Hormuz has led some countries to face energy shortages, requiring them to turn to other energy sources. Japan, India, Bangladesh, the Philippines, South Korea, Thailand, Taiwan, China, and some European countries have been forced to increase their coal use to fill the gap. In addition, some countries are not only turning to coal for power; China’s coal consumption for chemical product production has also increased in recent months due to high oil prices. 

Coal consumption may increase further in some regions of the world in the coming months if a particularly strong El Niño weather pattern occurs, as predicted. Higher-than-normal temperatures and lower hydropower output could drive up power demand across Asia, in large markets such as India and Vietnam.

Global coal production matched a record high in 2025 but is expected to decrease slightly year over year in 2026. Despite that, the IEA expects demand for the energy commodity to rise by 1.2 per cent in 2026, bringing the world’s consumption to a record 8.94 billion metric tonnes. Coal demand by the world’s two biggest coal consumers, China and India, is expected to rise by 1 per cent and 4.2 per cent respectively, to 5 billion tonnes and 1.353 billion tonnes.

The outlook for 2027 is murkier given the unpredictability of trade in the Strait of Hormuz. If LNG flows recover next year, it could drive natural gas prices down, spurring a shift in gas and coal use. However, global demand will likely increase if energy trade remains restricted.

“Although shipping disruptions in the Strait of Hormuz do not directly affect coal markets” and virtually no coal shipments pass through the Strait of Hormuz, “tighter natural gas supply has pushed up prices, prompting some electricity systems to switch from gas to coal,” the IEA stated.

News of increased coal use is concerning, given that the United Nations (UN) has, for the first time, acknowledged that the world is set to overshoot its target of limiting global warming to 1.5°C above pre-industrial levels. As part of efforts to support a global green transition and uphold climate pledges, diplomats from almost every country agreed to “phase down” global coal consumption at the 2021 COP26 climate summit in Glasgow.

However, since the signing of the agreement, several countries have continued to rely on coal burning to meet rising electricity demand. While many countries are investing heavily in accelerating the development of their renewable energy sectors, it is expected to take several years to eliminate the need for fossil fuels for power in most countries.

In March, Italy announced plans to postpone the shutdown of its coal-fired power plants for all of 13 years. Germany has also announced it is considering restarting some of its coal plants to meet the country’s energy demand. In March, Chancellor Friedrich Merz stated, “We must supply this country with electricity. I am not prepared to jeopardise the core of our industry simply because we have adopted phase-out plans that have become unrealistic.”

Somewhat surprisingly, given President Trump’s aim to revive the ageing coal sector, coal consumption in the United States is expected to fall by around 7 per cent this year, following an unexpected jump last year. The United States has been largely sheltered from the global gas disruption thanks to its abundant, cheap domestic natural gas. Vast quantities of U.S. solar and wind energy have also come online this year, following years of accelerated development, further reducing the need for coal. 

Nevertheless, the United States made a significant contribution to the increase in global emissions in 2025. According to the Energy Institute, global energy-related carbon dioxide emissions rose by 1.1 per cent to 35.806 billion tonnes, with the United States accounting for about 13.3 per cent of the increase in direct energy-related CO2 emissions. Under a broader measure that also includes methane and flaring emissions, the United States accounted for roughly a third of the global increase.

This demonstrates just how detrimental an increase in coal consumption can be for global emissions, with coal-related emissions expected to climb significantly this year in line with higher consumption.

By Felicity Bradstock for Oilprice.com

 

War Is Now A Core Risk Category For Data Centre Operators

By City A.M - Sep 21, 2026

• Data centre lawsuits nearly quadrupled between 2021 and the first half of 2026, with planning and environmental disputes driving most of the growth.
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• Howden found that 2025 alone saw data centre space near active conflict zones equal to about 60% of the previous five years combined, after drone strikes hit five facilities in the UAE and Bahrain.
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• Insurers are being pushed to blur the lines between cyber, property and war coverage as data centre risk becomes physical as well as digital.
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As data centres scale, consume more power, and draw tighter community scrutiny, insurance risks are becoming increasingly complex.

As AI infrastructure grows, so do legal risks: large lawsuits involving data centres more than tripled from four in all of 2021 to 14 in the first half of 2026, according to a Howden report.

Planning and environmental disputes are the main drivers of recent legal disputes. While noise and nuisance complaints, including those concerning diesel generator emissions and water consumption, have also become increasingly common, accounting for 78 per cent of the growth in liability cases involving data centres over the past three years.

 

Europe has roughly 3,300 to 3,500 data centres, with Germany and the UK leading in volume. But the sheer scale of infrastructure being built is drawing backlash from residents and regulators. The UK’s Ofgem has already raised alarms over speculative data centre projects clogging up Britain’s electricity network.

Rising geopolitical issues on infrastructure

In addition to pushback from residents living near data centres, another issue facing the sector, highlighted in Howden’s research, is the growing exposure of data centre infrastructure to geopolitical instability and conflict worldwide.

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The report noted that in 2025, data centre space located within 10–15km of active global conflict zones was equivalent to around 60 per cent of the total recorded across the previous five years combined, highlighting how digital infrastructure has expanded near areas affected by war.

 

Earlier this year, five separate data centres in the UAE and Bahrain were struck by Iranian drones during the early stages of the US war in Iran. These attacks were known as the first deliberate wartime targeting of commercial data centres.

As physical and digital risks converge, the lines between cyber, property, and war insurance are blurring. Howden suggested that, to adapt, the market must align policy wordings and conduct rigorous cyber-physical risk assessments.

Edward Howland Jackson, chief commercial officer, global specialty, Howden, said: “The AI boom is fuelling huge investment in data centres globally, but as our analysis shows, the risks associated with this expansion are wide-ranging and increasingly complex.

 

“For data centre operators, developers and investors, understanding where these risks are concentrated is critical. The opportunity for the insurance market is not simply to provide more capacity, but to use data, specialist advice and risk transfer to help clients identify these exposures early and build greater resilience as the sector expands

“Navigating this increasingly complex risk landscape requires specialist risk expertise and deep insurance market insight,” he added.

By City AM

The Secret Houthi-U.S. Deal That Could Push Saudi Arabia Back to Beijing

By Simon Watkins - Sep 21, 2026

• The Houthis could further escalate Red Sea disruptions.
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• Washington has reportedly opened direct talks with the Houthis while declining Saudi requests for military intervention, potentially complicating Riyadh’s security relationship with the United States.
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• Growing Chinese influence around the Red Sea and Indian Ocean could ultimately encourage Riyadh to deepen its ties with Beijing.

Back at the start of the U.S.’s ‘Operation Epic Fury’, OilPrice.com predicted three courses of action that Iran would take as it moved through the conflict escalation gears. First, most obviously, although apparently not to President Donald Trump’s team, was to close the Strait of Hormuz to cause oil, liquefied natural gas (LNG) and refined products prices to soar -- check. Second, was to launch attacks on Saudi Arabian oil infrastructure via the Tehran-backed Yemeni Houthis to further inflate energy prices and undermine the idea that U.S. allies in the Middle East could rely on Washington to protect them from Iran -- check. Third, was the blockade of the Bab el-Mandeb Strait, the other critical regional transit route for the world’s oil, LNG and refined products, to ramp up both the higher energy price- and regional insecurity-pressure still further. This last element has not yet been fully activated, but it is not far off. So, where do Iran and its Houthi protagonists go from here?

Within the next few days, the Houthis are likely to ‘officially’ close off the Bab el-Mandeb Strait to all ‘enemy’ shipping rather than to just the Saudis, as has been the case, a very senior energy source who works closely with Iran’s Petroleum Ministry exclusively told OilPrice.com over the weekend. “That will mean Iran effectively holds hostage up to 42% of the world’s crude oil flows [the Strait of Hormuz roughly 30% of oil, and Bab el-Mandeb about 12%] historically flowed on a historical basis and up to 30% of its LNG flows [Strait of Hormuz roughly 20% and Bab el-Mandeb around 10%], and the figures for refined products are at least as disturbing,” he said. Indeed, before the current blockades, the Strait of Hormuz accounted for up to 5.5 million barrels per day (bpd) of fully refined petroleum products including diesel, jet fuel, and petrochemical feedstocks like naphtha that were already cracked at Middle Eastern mega-refineries before entering maritime transit lanes. Meanwhile, the Bab el-Mandeb Strait -- the key gateway into southern Europe from the Gulf of Aden through the Red Sea and then Suez Canal -- handled up to 2.6 million bpd. “The soaring prices of many of these refined products -- notably diesel and jet fuel -- are possibly even more serious than for oil and LNG because Europe shut down many of its own ageing refineries over the years, so it relies on importing pre-cracked, finished diesel and jet fuel directly coming from the Middle East through the Bab el-Mandeb Strait,” he added. The recent seizures by the Houthis of several key islands in the Red Sea -- including the centrally-positioned Perim Island in the mouth of the Strait between Yemen and Djibouti -- give the group and Iran far greater leverage over the Red Sea/Suez Canal transit route than they had before. In fact, International Monetary Fund (IMF) PortWatch data shows that overall shipping through the Bab el-Mandeb Strait has dropped nearly 90% below normal averages, even without the Houthis declaring a general blockade on it. “Using the Houthis on the Bab el-Mandeb has been a clever move from Tehran because it stretches already-stretched U.S. forces, and leaves Washington’s previous assurances that it would look after its allies in the region looking like hot air,” he highlighted.

Staggeringly for many observers -- not least, the Saudis -- came recent news that not only had the U.S. directly refused to help the country militarily against the latest Houthi, and by extension Iranian, threats but also that Washington was in direct contact with the Houthi leaders. Confirmed by OilPrice.com through Iranian and Washington sources with close knowledge of the matter, just over a week ago Trump refused to authorise direct U.S. air strikes to halt the Houthi advance along the Red Sea coast when asked to do so by Saudi Arabia’s Crown Prince Mohammed bin Salman (MbS) in two separate telephone calls on 10 September. This was the day the Houthis completed their capture of the strategic port city of Mokha and were pushing quickly across several Red Coast targets. Trump instead sent CENTCOM Commander Admiral Brad Cooper to Riyadh for emergency intelligence-sharing coordination and has still not authorised any military assistance for the Saudis. Given Trump’s legendary long memory when it comes to grudges, perhaps the refusal was partly because MbS had persistently refused to take the telephone calls from former U.S. President Joe Biden in March 2022, when Washington desperately needed help from the Saudis to help bring spiralling oil prices down after Russia’s invasion of Ukraine, as analysed in full in my latest book. Perhaps it was due to ‘assurances’ from the Houthis that they would not attack U.S. vessels in the Bab el-Mandeb Strait. Such assurances were reiterated during the direct U.S.–Houthi negotiations that took place at the U.S. Embassy in Muscat, Oman, mediated by the Omani government, over the weekend of 12–13 September 2026, with the specific face-to-face session occurring on 13 September. “Up until then, the Saudis still thought the U.S. had its back,” a senior source who works closely with the European Union’s (E.U.) security complex exclusively told OilPrice.com last week. “After that, it [Saudi Arabia] knows it’s on its own now,” he added.

Widening the current military campaign against Saudi Arabia is certainly another of the next steps the Houthis will take, if it gets the chance, according to the Iranian source. This may come sooner rather than later, given Saudi plans -- discussed again over the weekend -- to form a standalone 14-country task force called the Multinational Maritime Defense Coalition (MMDC), which will also include elements of the recently formed Mecca Joint Defence Agreement (MJDA) framework analysed by OilPrice.com. The MMDC comprises MJDA countries (Saudi Arabia, Pakistan and Turkey), Egypt, Kuwait, Bahrain, Qatar, Jordan, Yemen (the anti-Houthi Presidential Leadership Council), Djibouti, Somalia, Sudan, Bangladesh, and Nigeria. The inclusion here of Djibouti may not be helpful to the Saudis because -- as also examined in my latest book on the new global oil market order -- Iran’s main superpower backer, China, has a vice-like grip over the country due to predatory loans connected to its ‘Belt and Road Initiative’ multi-generational power-grab project. In fact, following Chinese investment of around US$14 billion in the country (totalling over 70% of Djibouti’s debt, and making it the country’s biggest debtor), Beijing in 2017 created its first overseas military base there. Given that Chinese vessels remain largely unaffected on the orders of Iran from the current blockades on the Strait of Hormuz or the Bab el-Mandeb Strait, it appears that Djibouti’s involvement in the MMDC will just be part of a balancing act geared toward protecting Chinese economic self-interest, rather than a genuine geopolitical desire to undermine Iran’s strategic goals. Consequently, anything China does in this ‘alliance’ is likely to be confined to quietly pressuring Tehran to tell the Houthis to keep the disruptions selective.

Worse still for Saudi Arabia’s plans to quell the Houthis threat is that Beijing’s highly integrated BRI-related economic and logistics corridor runs all the way from the Horn of Africa to the wider western Indian Ocean, and into another of Riyadh’s ‘partners’ in the MJDA -- Pakistan. Djibouti is not just home to a massive Chinese military base but also acts as the maritime centre for Ethiopia, with Beijing owning the US$4 billion Addis Ababa–Djibouti Railway essential for Ethiopia’s exports. To the south of Ethiopia is Kenya, which China has established as its primary commercial maritime gateway into the African continent through the building of the Mombasa Port Expansion project and the Lamu Deep-Water Port.  And northeast of Djibouti across the Arabian Sea is the crown jewel in China’s maritime choke point strategy -- Pakistan’s Gwadar Port. As thoroughly detailed in my latest book, Gwadar is directly tied to the China-Pakistan Economic Corridor, officially a commercial deep-water port operated by China Overseas Ports Holding Company, but it is heavily constructed to act as a dual-use facility capable of resupplying, repairing, and docking the People’s Liberation Army Navy’s capital ships. Moreover, in each of these areas there is also ample opportunity for the Houthis to hook up with fellow like-minded Islamic extremist terrorists too, thus creating a force multiplier effect across the region. Aside from the Tehrik-e-Taliban Pakistan operating widely across that country, Al-Qaeda-affiliated extremist group Al-Shabaab is based in Somalia with a very broad reach into Djibouti, Ethiopia, Kenya, and Sudan. Looking at all of these factors, and given the strong relationship that had built up between Saudi Arabia and China in the years following the end of the 2014-2016 Oil Price War, it may well be that the key victory for the Houthis to come will be a switch back in Riyadh’s primary geopolitical alliance to China, and away from the U.S

By Simon Watkins for Oilprice.com

HE DISAGREES WITH THE BOSS

U.S. Energy Secretary: Blunt Tool of Banning Diesel Exports Doesn't Work

By ZeroHedge - Sep 23, 2026

US Energy Secretary Chris Wright has publicly opposed calls for a ban on US diesel exports, arguing on Wednesday that the measure would backfire by increasing gasoline and jet fuel prices.

"The blunt tool of banning diesel exports definitely doesn't ‌work," Wright said at an event in New York, as reported by Reuters.

Wright said restricting exports would leave refiners with excess diesel inventories, forcing them to cut refinery output.

Lower refinery runs, he warned, would tighten supplies of other fuels, ultimately driving up costs for consumers and businesses.

His comments put him at odds with President Trump, who signaled support for the idea on Tuesday as diesel prices surge to record highs in the US and Europe (and Treasury Secretary Bessent has been assigned to see "if it's feasible."

Trump's comments already sent European prices for the fuel surging.

With flows from the region’s top supplier at risk, Bloomberg reports that European diesel’s premium to Brent crude jumped to more than $95 a barrel on Wednesday, a record in Bloomberg data going back to 2011.

Known as the crack spread, the indicator has been keenly watched by central bankers as they seek to tame inflation. The equivalent measure in the US, meanwhile, weakened.

Trump’s threat comes as Europe is already grappling with the loss of diesel shipments from the Middle East, and Russian export curbs have tightened the global fuel market further. The US has become Europe’s main overseas supplier, with American exports of the workhorse fuel surging to a weekly record near 2 million barrels a day last month.

A key US oil industry group cautioned against the move, saying it could lower American fuel production and damage the global economy.

Of the 8 million barrels of diesel traded globally by sea each day, the U.S. supplies about 1.5 million of them - about 20%. An export ban would remove the single largest source of global diesel from the market, and the consequences could be catastrophic.

“Restricting exports is not a solution to high prices,” the American Petroleum Institute says.

“Removing US diesel from the market could instead result in reduced refinery runs, global economic damage and even higher US prices.”

Indeed, as Bloomberg macro strategist Michael Ball wrote this morning, while the White House may be able to engineer a brief drop in US diesel prices by limiting exports, it risks creating a bigger supply problem down the road.

With distillate stocks at seasonally record lows...

...the appeal is obvious with US diesel above $6.50 a gallon...

But a broad curb could strand as much as 1.5 million barrels a day, roughly 29% of US diesel output.

If enacted, Ball writes, the effects would be uneven across the US.

A surplus would build on the Gulf Coast, while pipeline, shipping and fuel-specification constraints limit how easily those barrels can reach tighter East and West Coast markets.

Bloomberg Intelligence estimates Gulf Coast storage could only absorb about three weeks of net diesel exports before constraints bite.

The global impact would be worse.

Kpler argues there is no real replacement for US export volumes, leaving Latin America and Northwest Europe particularly exposed and increasing competition for Indian barrels.

China could compound the squeeze as domestic inventories fall and the risk of renewed export curbs rises.

The response from refiners would create a negative feedback loop.

If trapped barrels crush margins, refiners are incentivized to cut runs and undertake maintenance.

S&P Global Energy estimates crude runs might need to fall by nearly 2 million barrels a day - more than 10% of the current production level - to clear the surplus.

That is the asymmetry: lower US diesel prices first, tighter global product markets follow, and potentially less US fuel supply later.

The more aggressive the restriction, the greater the risk that today’s price relief becomes tomorrow’s supply problem.

By Zerohedge.com

Trump Backs Diesel Export Ban as Prices Hit Record Highs

By Irina Slav - Sep 23, 2026

President Trump has declared his support for a potential ban on diesel fuel exports amid record-breaking prices at the pump.

“I've said let's not send out the diesel. We make a lot of diesel ... I've called for it. I've called for it within my people,” Trump said, as quoted by Reuters, on the sidelines of this week’s UN General Assembly.

The comment follows a statement by Treasury Secretary Scott Bessent that the administration was mulling over the effectiveness of such a ban on exports, and whether it would be partial or total. The national U.S. average for diesel hit $6.5276 on Tuesday, according to AAA.

The idea of a ban on diesel exports emerged earlier this month, with Rep. Tim Burchett tabling a bill to that effect last week. Senate Majority Leader John Thune has backed the proposal. Energy Secretary Chris Wright and Interior Secretary Doug Burgum oppose it as a bad idea that would ultimately backfire, but the very fact that some legislators considered an export ban suggests the supply situation is pretty grim even for the world’s largest oil producer.

“American fuel should stay home with Americans,” Alaska Senator Dan Sullivan said in a statement on Tuesday, as quoted by Reuters. “The cost of diesel is just too damn high. I'm calling for a temporary pause of American diesel exports so that we can rebuild our reserves ahead of winter and put American and Alaskan families first.”

With the U.S. president signaling support for such a move, the chances of a ban have improved. Trump earlier blamed the surge in U.S. diesel prices on Ukraine and its drone attacks on Russian refineries, calling on President Zelensky to stop the attacks so prices can come down.

As a result of the refinery attacks, Russia has instituted a ban on its own diesel fuel exports, contributing to a major squeeze as diesel exports from the Middle East get compromised by the U.S. and Israeli war with Iran.

By Irina Slav for Oilprice.com

Global Refinery Crunch Pushes Diesel Prices to New Records

By Irina Slav - Sep 21, 2026

• U.S. diesel prices have surged above $6.50 per gallon, as lost Middle Eastern and Russian fuel supplies collide with limited global refining capacity.
• 
  
• Washington is debating a diesel export ban to ease domestic prices, but opponents warn it could worsen the global shortage and potentially trigger similar restrictions elsewhere.
• 
  
• Europe is particularly vulnerable, having closed significant refining capacity while becoming increasingly dependent on imported crude and refined fuels from the Middle East and other regions.
• 
  

U.S. diesel prices broke another record last week, topping $6.50 per gallon. In Europe, fuel prices are soaring, and shortages are looming over already struggling economies. There is simply not enough refining capacity in the world to make up for the loss of Middle Eastern and Russian barrels. And there is no quick fix.

Last week, Russia said it would extend a ban on diesel exports until the end of October, as Ukrainian drone attacks on refineries continued, despite President Donald Trump’s call on the Zelensky government to stop attacking energy infrastructure, blaming the diesel price surge solely on those attacks. The latest attack came on Sunday, targeting one of Russia’s largest refineries.

However, the loss of fuel supply from the Middle East is much larger, the Wall Street Journal reported last week, citing figures from the International Energy Agency showing the amount of diesel output lost in the Middle East was three times as high as lost Russian supply.

Now, there are calls in Congress for a U.S. ban on diesel exports. Rep. Tim Burchett tabled a bill to that effect last week, and Senate Majority Leader John Thune has backed the proposal. Energy Secretary Chris Wright and Interior Secretary Doug Burgum oppose it as a bad idea that would ultimately backfire, but the very fact that some legislators considered an export ban suggests the supply situation is pretty grim even for the world’s largest oil producer.

Diesel prices underpin the price of pretty much everything else. When they rise, other prices follow, notably food prices, to which people are particularly sensitive. This is of particular concern in Washington ahead of the midterm elections in November, hence the idea of an export ban. A ban could bring down prices at home, but it would push prices even higher elsewhere, aggravating an already quite grave fuel supply crisis. It is a crisis that no one could have foreseen, but also one that might have arguably been less grave had there been more refining capacity in the world.

The fact is that over the past decade or so, a lot of refineries have been shut down under pressure from the net-zero movement that has come to dominate energy policies, mainly in Europe, but also in the U.S. under Democratic administrations. Refining had become a losing game for many, so they either shut down or converted their capacity to biofuels.

“We’ve seen the oil majors effectively reduce their exposure to that sector because the returns on actual capital employed have been poor,” Wood Mackenzie senior VP for refining, chemicals, and oil markets Alan Gelder told the Wall Street Journal. “The classic phrase we used was: ‘How do you make a small fortune? Take a large fortune and build a refinery.’”

While refineries closed in Europe and the United States, however, Middle Eastern petrostates built new ones, coming to account for a bigger portion of global refining capacity. Profit, per the experts cited by the WSJ, was not the primary motivation. Employment and domestic fuel supply security were. Now, that capacity has been compromised – and some of it has been damaged by Iranian strikes on Gulf energy infrastructure – and there is no one to pick up the slack, with U.S. refiners already operating at rates as high as they can.

To add insult to injury, there is one refinery in Europe sitting idle because it is the property of Russia’s Lukoil, which the Trump administration sanctioned last November, prompting the company to put its international business up for sale. According to a recent report by the Financial Times, a deal between Lukoil and Carlyle Group for the latter’s acquisition of the business had become “bogged down in an inter-agency process involving the National Security Council, State Department and Department of Energy,” leaving urgently needed refining capacity offline.

“There is significant underutilised refining capacity across Lukoil’s European assets that could help bring additional refined-product supply to market and ease pressure on fuel prices,” Carlyle said, as quoted by the FT, referring probably to the Romanian Petrotel refinery, which has been idled since the U.S. sanctions went into effect. Lukoil’s Bulgarian facility is operating. Petrotel has a capacity of about 50,000 barrels daily. This is not a huge amount of fuel, but in the current crisis, every barrel matters.

There is no solution to the world’s fuel problem in sight. Tanker traffic via the Strait of Hormuz remains severely depressed, Ukrainian drone attacks on Russian refineries continue, and if the U.S. bans diesel exports, according to the WSJ, China and India may follow its example, plunging the rest of the world into hitherto unseen levels of fuel shortages. The biggest loser of the situation, it appears, will be Europe, due to its heavy dependence on energy imports in both crude oil and refined products, and its shrinking refining capacity.

By Irina Slav for Oilprice.com