Generated by Codex with GPT 5.6 Sol XHigh

Oil markets are sending a misleadingly calm signal. Even after renewed fighting around the Strait of Hormuz, Brent crude remains well below its April peak. Yet the fuels people and businesses actually use - petrol, diesel and jet fuel - are scarce and expensive. The reason is that the global energy shock has shifted from oil wells to refineries: the world has enough crude, but too little capacity to turn it into usable products.

The bottleneck is refining, not extraction

When America reinstated its naval blockade on Iran and launched fresh air strikes, Brent crude jumped by 10% to 83 dollars a barrel. It did not climb further partly because traders expect President Donald Trump to retreat as the midterm elections approach. More important, global crude supply still exceeds what refineries can consume.

Refineries are processing about 79m barrels a day, 7m fewer than before the war. That leaves crude abundant while supplies of refined products remain tight. Fuel prices are 35-60% above pre-war levels. Asian jet fuel costs roughly 150 dollars a barrel, up from about 100 dollars, while diesel-refining margins in Europe and America are at or near records. A crude-price benchmark therefore understates the pressure already reaching airlines, freight companies, farmers and motorists.

Three disrupted suppliers

The outlook depends largely on the Gulf, China and Russia, and each faces a different constraint. The Gulf was the world’s largest exporter of middle distillates such as diesel and jet fuel. Since February, refinery throughput there has fallen by 30%, or about 3m barrels a day. Pipelines can carry some crude around Hormuz, but refined products have no equivalent escape route. Iranian strikes have also disabled an estimated 1.4m barrels a day of Gulf refining capacity. Even if the strait reopens, repairs and recovery could take three to four months.

China’s refineries are processing 3m barrels a day less than in February. Beijing restricted state-owned refiners from exporting petrol and diesel during much of the war, then allowed limited sales only if inventories stayed above pre-war levels. With tensions rising again, a full reopening of Chinese exports looks unlikely and the restrictions could tighten at any time.

Russia’s problem is physical damage. Ukraine’s expanding drone campaign is striking more refineries, including complex units that can take months to repair. Russian plants processed only 3.8m barrels a day in June, 1.5m fewer than in January. Domestic shortages have led to queues, rationing and pump prices as much as 50% above normal. Moscow has also prohibited diesel exports.

The effects spread far beyond Russia’s direct customers. Russia normally supplies 12% of globally traded diesel and 16% of fuel oil. Turkey, deprived of Russian diesel, is keeping more of its own production at home. Brazil is buying replacement barrels from America, tightening the Atlantic market. Refineries that prioritise diesel may in turn produce less petrol and jet fuel.

The shock is not over

A benign outcome requires several things to go right at once: fighting in the Gulf must stop, Hormuz must reopen reliably, Asian refineries must raise output and Russian capacity must recover. If that happens, supplies could return as the Northern Hemisphere’s summer demand fades.

If it does not, America and other importers will have to draw down already low fuel inventories. Prices would then rise until demand falls and refiners have enough incentive to process more crude, eventually pulling crude prices higher too. The article’s central warning is that oil abundance does not mean energy security. The world depends just as much on refineries, shipping routes and the trade in finished fuels - and all three are now under strain.