Why Global Diesel Prices Are Soaring: War, Hurricanes & Drone Attacks

Diesel prices are hitting “insane” levels at $180/barrel wholesale, and a Gulf hurricane could mean “apocalyptic numbers” past $200, warns Gulf Oil’s Tom Kloza. He breaks down the unprecedented impact of drone attacks on global oil infrastructure, further tightening the refined products market. Plus, how US diesel exports are soaring and fuel surcharges are leaving shippers in the red.

Wholesale diesel prices have climbed to roughly $180 a barrel on world markets — already exceeding the peaks many analysts expected after Russia’s invasion of Ukraine — and could push above $200 a barrel if a tropical storm threatens Gulf Coast refining infrastructure, according to Tom Kloza, Chief Energy Advisor for Gulf Oil, speaking on FreightWaves Today.

The warning comes as fresh Energy Department data showed the United States exported nearly 2 million barrels of distillate last week, a record, on top of domestic consumption running close to 3.5 million barrels a day. With refinery margins offering roughly $90 more per barrel of diesel than the cost of crude — itself trading in the mid-$80s — U.S. refiners are running hard, but maximum domestic output is capped near 5.3 million barrels a day, leaving little buffer if demand spikes or unplanned outages hit.

Kloza pointed to a rapidly expanding threat that he said the media has largely overlooked: drone strikes on refining infrastructure. In the span of a single week, attacks knocked out refining capacity in Russia, Saudi Arabia, and Libya. Kloza warned that the tactic is now a permanent fixture of the energy security landscape, noting that drones costing tens of thousands of dollars can destroy billions of dollars of petroleum infrastructure because refineries are, in his words, essentially powder kegs.

“For the first 48 years of my career, I never heard about a refinery being attacked with drones. And in the last 2 years, it’s been happening in spades,” Kloza said.

Global refining capacity is already short by an estimated 7 to 9 million barrels a day, Kloza said, a gap worsened by Venezuela’s long decline and Latin America’s growing dependence on U.S. diesel supply. That makes the U.S. Gulf Coast what Kloza called “the cleanest dirty shirt” for sourcing distillate, a position that benefits the U.S. trade balance but also concentrates global price risk on a narrow stretch of coastline.

Kloza said the Trump administration could raise the specter of diesel export curbs to cool prices if the market overheats, noting that presidential commentary on social media has already helped keep crude oil below $100 a barrel. He cautioned, however, that actually imposing export restrictions would be counterproductive: “That would be a horrible policy outcome,” he said, because suppressing domestic prices would discourage refinery investment at exactly the wrong time.

The interview also surfaced a structural distortion in how fuel surcharges are calculated. Kloza and FreightWaves founder Craig Fuller noted that government-linked fuel surcharges are indexed to EIA retail diesel prices, yet only about 2% of large fleets actually pay retail. The vast majority buy at cost-plus or negotiated rack-minus arrangements, meaning shippers tied to EIA-based surcharge formulas may be overpaying relative to what carriers actually spend at the pump. Consolidation among the three dominant truck-stop chains has amplified that spread, giving major fueling networks significant pricing power over the posted numbers that underpin those surcharge calculations.

• Wholesale diesel hit ~$180/barrel globally, with Kloza warning prices could top $200/barrel if a Gulf Coast hurricane disrupts refining.
• Drone strikes knocked out refinery capacity in Russia, Saudi Arabia, and Libya within a single week, threatening a global market already 7–9 million barrels/day short on refining capacity.
• U.S. fuel surcharges are indexed to EIA retail diesel prices, but roughly 98% of large fleets buy at negotiated cost-plus rates, creating a windfall discrepancy for carriers and excess costs for shippers.

This Summary is generated thanks to a transcription of the interview, for the full interview please enjoy the video above.