Here's a fun fact about the global economy: you can have all the crude oil in the world and still run out of the stuff that actually moves trucks, tractors and jets. That's roughly where we are right now with diesel.

U.S. diesel prices are hovering near record highs as the wars in the Middle East and Ukraine squeeze global refining capacity. A top European central banker warns high diesel prices could linger much longer. But some investors expect oil to tumble once the Strait of Hormuz reopens.

The average price for a gallon (3.79 liters) of diesel was $6.50 on Friday, up from $5.62 a month earlier, according to the American Automobile Association (AAA), which tracks fuel prices daily. That's just below the record of $6.53 set earlier this week.

The key risk is "higher-for-longer energy prices," European Central Bank (ECB) Vice President Boris Vujcic said on Friday. He spoke at a conference in Cleveland organized by the ECB and the Federal Reserve Bank of Cleveland.

Refining Capacity Won't Rebound

Vujcic added that markets share that view.

"It's quite clear now that in the foreseeable future we will not see the refining capacity coming back to the levels where it was before this conflict," he said.

"That's why the energy prices will, particularly diesel, stay probably high for long and then it'll feed into the inflation, because diesel is really in many products."

Global refinery throughput rose to 81 million barrels per day in July but remained nearly 5 million barrels per day below year-earlier levels. That is about 6%, below year-earlier levels, according to the International Energy Agency (IEA).

Even before the war, U.S. refining capacity had been shrinking. It fell by more than 250,000 barrels per calendar day, or about 1%, to 18.2 million barrels per calendar day as of Jan. 1, 2026, according to the U.S. Energy Information Administration (EIA).

Disruptions Tighten Global Supply

Disruptions abroad have since cut the amount of fuel available worldwide. This put more pressure on U.S. refiners to fill the gap.

In Russia, Ukrainian drone attacks have damaged major refineries, forcing production cutbacks and a diesel export ban. In the Middle East, the closure of the Strait of Hormuz, through which some 20% of the world's oil and liquefied natural gas passed before the war, has caused swings in energy prices.

Global diesel markets are "especially vulnerable" to oil-supply disruptions caused by the Iran war, Atlantic Council analysts said this week.

"The Middle East's medium-sour crude oil is a highly suitable feedstock for producing middle distillates such as diesel and jet fuel," they said. "When exports from the Middle East fall, so too does global diesel production."

Windfall For U.S. Refiners

For U.S. refiners, the crunch has been a windfall.

Valero Energy Corp (VLO), Phillips 66 (PSX), Marathon Petroleum Corp (MPC) and Exxon Mobil Corp (XOM) all posted record or near-record second-quarter earnings, according to Reuters.

The price spike has also drawn a political response. The Trump administration and Republican lawmakers are weighing restrictions on U.S. diesel exports ahead of the midterm elections.

Energy Secretary Chris Wright warned that restricting diesel exports would strain storage capacity and force refiners to cut production. Reduced refining would push gasoline and jet fuel prices higher, he said Wednesday at an Economist event in New York.

"A diesel export ban would likely create more problems than it would solve," the Atlantic Council analysts wrote.

NATO Sounds Alarm

The prospect of a U.S. export ban also worries Europe. Years of refinery closures have left the continent reliant on imported fuel.

NATO Secretary General Mark Rutte warned that the shortfall could leave Europe exposed in the event of a war.

"Refineries are being closed down," Rutte told Bloomberg Television on Thursday. He spoke on the sidelines of the United Nations General Assembly in New York.

He called it "a big worry" as the U.S. weighs a diesel export ban.

Hormuz Deal In Limbo

The outlook could shift quickly if the Strait of Hormuz reopens.

Iranian Foreign Minister Abbas Araghchi said Friday at the United Nations that Iran had delivered a plan to the U.S. through Qatar. The proposal could reopen the waterway within seven days "if the necessary conditions are met," he said.

Within hours, however, the Wall Street Journal reported that President Donald Trump had rejected the proposal, citing U.S. officials.

Trump is privately skeptical Iran would meet his demands. He has told staff he sees a renewed bombing campaign as likely after the November midterm elections, the report said.

Oil Poised To Tumble?

Still, Ark Invest CEO Cathie Wood said in an investor letter published Tuesday that oil is poised for a steep fall once the strait reopens.

The Iran war price spike, she argued, has caused both supply bottlenecks and demand destruction. Meanwhile, output is climbing in countries with spare capacity. They include Venezuela, Libya and the United Arab Emirates, with help from U.S. oil companies, Wood said.

Wood added that she would not be surprised to see oil fall back toward $30 to $35 a barrel over the next few years.

"Deflation can be good news," Wood wrote, arguing that a sharp drop in oil prices would act like a tax cut for most consumers and businesses.

Even so, a slide in crude prices may offer limited relief at the diesel pump as long as the world remains short of refining capacity.