The second shortage
Published 2 October 2026
A tanker full of crude cannot refuel a truck.
The IEA's September 2026 report calls the episode a diesel squeeze. It says diesel and gasoil accounted for nearly thirty percent of global oil demand, with US prices for those products exceeding $200 per barrel in early September, ninety-four percent above the pre-war level. Those are reported product-market observations in the report's time window, not a pump-price conversion for India. IEA September report.
In August, net diesel and gasoil exports from Gulf countries averaged about 390,000 barrels a day, just over a quarter of pre-war levels. The report describes Gulf and Russian net exports combined as 1.6 million barrels a day below February. Disruption to Russia's refineries from Ukrainian attacks compounded the Gulf losses. Two different wars were converging on the same product market. Source record.
A crude price and a diesel price need not move together. The difference between the product value and the feedstock cost is part of what makes a refining margin. When usable refinery capacity is scarce, the product can become disproportionately expensive even if crude supply recovers. A refinery outside the disrupted region may earn more for converting the same input, provided it can obtain feedstock and export its output.
This creates a split within India's energy industry. Export-capable refining can find attractive foreign markets at the same time domestic retailing faces a constrained selling price. The integrated company has to be read by segment and cash flow, not by one headline saying oil companies win or lose.
Export restrictions can then intensify the split. On 30 September, TASS and Anadolu reported that Russia extended the ban on direct-producer exports of diesel, marine fuel and gasoil through 31 October 2026 inclusive. Both attribute the decision to the Cabinet press service and distinguish it from broader fuel restrictions extending into January 2027. The precise scope matters: this file does not call it a verified prohibition on every possible Russian fuel movement. TASS; Anadolu.
The American issue was different at the reporting cutoff. The late-September accounts describe the US considering diesel export curbs to ease domestic prices. Consideration is not implementation. A reported Russian extension cannot be used as evidence that Washington has also imposed a ban. Status of US discussions.
Why would an exporter restrict sales just when foreign customers will pay more? Because the state has another objective: domestic availability and affordability. The private company sees an export margin. The government sees households, transport, farming and inflation. Restricting exports may help domestic supply while transferring scarcity to the rest of the market. The global effect depends on actual volumes, exemptions and the ability of others to replace the product.
For India, the same choice is visible at the pump. Bloomberg's reported private-retailer restrictions were intended partly to deter bulk hoarding and industrial buyers from using retail outlets. Holding one channel's price below another can create an incentive to buy through the cheaper channel. The resulting queue is an arbitrage signal, not automatically proof of a nationwide physical absence of fuel. Retail-channel report.
The important watchpoints are operational: refinery repairs, diesel export loadings, actual restrictions, product inventories and the spread between product and crude prices. A peace headline may lower a crude risk premium immediately. Rebuilding product supply can take longer.
The refinery and the kitchen share a feedstock
An Indian government statement to Parliament on 12 March 2026 describes directing refineries to maximise LPG production and route specified C3 and C4 streams to the public oil marketers for domestic cooking gas. The minister reported a twenty-eight-percent production increase over five days. This is the government's reported early-crisis response, not independently measured September output or proof that every product's availability remained unchanged. Petroleum minister's parliamentary statement.
The statement also describes a three-member committee of executive directors from IOC, HPCL and BPCL for commercial-LPG allocation. This is a documented example of the energy companies meeting over a real allocation question. Its purpose was distributing scarce supply under government policy. It does not substantiate the remembered claim that chairmen meet to determine their stock-market profits.
The relevance is the refinery's constrained product menu. The system can prioritise a domestic cooking-fuel requirement, but the feedstock and processing capacity still have alternative uses. A refinery's economic preference, a retailer's customer demand and a government's emergency priority need not point in the same direction. Policy can allocate the output; it cannot eliminate those physical trade-offs.
That is why the public-interest role has to be analysed rather than mocked or romanticised. Maintaining household availability can be a meaningful achievement, while its cost appears in company margins, compensation or displaced output. The purpose and financial consequences can both be stated without pretending either is the whole story.
The aircraft competes with the truck inside the refinery
The shortage can travel through a refinery's production choices before it reaches a road. EIA's June 8, 2026 account reports a four-week average US jet-fuel production estimate above two million barrels a day in the week ending May 1, compared with 1.7 million at the end of February. Refiners increased runs and adjusted yields in response to high jet-fuel prices and demand for replacement supply abroad. This is a dated production estimate, not a claim about US output on September 30. Source record.
The price incentive was substantial. EIA reports US Gulf Coast jet-fuel spot prices averaging $3.91 per gallon from March through May, with a jet crack spread averaging $1.25 per gallon against $0.42 at the year's start. The crack spread is an indicator of the product's value over crude in that market. It is not the refinery's final net profit after all operating, financing and other costs. The same June account says European and Asian prices moved closer to US Gulf Coast prices as replacement exports helped ease concerns of an imminent shortage. Source record.
EIA's July account makes the competing product mix visible. For the second quarter it estimated US jet production 24% above the five-year average, distillate production 5% above, and gasoline production only 1% above. Estimated distillate exports averaged 1.56 million barrels a day and jet exports 356,000. These are quarter-specific estimates using the comparison periods stated by EIA. They are not evidence that every product shortage was cured or that these export rates continued unchanged into September. Second-quarter account.
By September 17, the IEA's Russian-refining commentary described OECD diesel output in June as broadly flat year-on-year even with high utilization, as refiners maximized jet production for summer demand. The observation illustrates a constraint rather than a universal one-for-one exchange: a refinery's feedstock, equipment and operating choices determine what mix it can deliver. Strong demand for jet fuel does not automatically summon a separate, unlimited source of diesel for trucks and harvests. Source record.
A repaired front gate does not restore the whole plant
The same IEA commentary distinguishes primary distillation from the more complex units that improve product yields and quality. It says minor damage to a crude distillation unit can typically be repaired in one or two weeks, while serious damage to complex secondary units can require six to eight months on average. These are the report's indicative repair periods, not a repair promise for a particular refinery. The implication is that restored crude intake may precede restored output of the products the market needs most. Source record.
The international cost does not wait for every plant to finish repairs. The IEA puts combined Middle Eastern and Russian diesel exports at a preliminary 520,000 barrels a day in August, 75% below the corresponding month a year earlier, with higher US shipments and recovering Asian exports providing only part of the offset. Those are regional diesel export flows, not total crude exports or all global oil production. Their decline explains why an improved crude-shipping headline can coexist with a difficult diesel market. Source record.
A transport minister, an airline, a farmer and a refinery shareholder can therefore read the same oil headline and ask four different useful questions. The minister asks about continuity and affordability. The airline asks for jet fuel at its airports. The farmer needs diesel and inputs before the field's calendar moves on. The shareholder asks which equipment can produce the premium product and what it costs to keep that equipment working. A crude recovery answers only part of each question.
Someone has to find the remaining diesel, finance it, charter a ship and deliver it to the customer willing to pay. That someone may be a name missing from the motorist's receipt.
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