Global Diesel Prices Surge Amid Supply Constraints, Robust Demand - Rystad Energy
By Siti Radziah Hamzah
KUALA LUMPUR, April 2 (Bernama) -- Diesel prices are rising faster than petrol due to structural supply constraints, sustained industrial demand and limited flexibility in refining systems, according to energy research firm Rystad Energy.
Its managing director for Asia Pacific, Vijay Krishnan, said global markets are currently facing a diesel shortage driven by its critical role in transportation, manufacturing and industrial activity, which keeps demand resilient even during periods of disruption.
“The world is in a shortage of diesel, not just Malaysia,” he told Bernama on the final day of the three-day Offshore Technology Conference Asia (OTC Asia), here today.
OTC Asia is a premier biennial event for energy professionals, focusing on advancing offshore resources, technology, and environmental sustainability in the region.
Meanwhile, Vijay said the imbalance is compounded by the structure of Asia’s refining system, where many facilities are configured to process medium and heavy sour crude typically sourced from the Middle East.
He said this dependence limits the ability of refineries to switch quickly to alternative, lighter grades when supply from the region is disrupted, constraining output of key refined products such as diesel.
Vijay said as a result, supply shocks in the Middle East are transmitted more directly into product markets, with the impact in Asia most visible across diesel, liquefied petroleum gas (LPG) and naphtha.
He said the disparity between diesel and petrol prices is also driven by the scale of global diesel demand, particularly from industrial activity and freight transport across both emerging and developed Asian economies, including Malaysia.
Vijay said diesel demand remains consistently strong due to its role in supporting economic output, making it more difficult for supply to keep pace during disruptions, while LPG markets are facing even sharper pressures in some cases.
He added that even under a ceasefire scenario expected around mid-April, the reopening of key transit routes such as the Strait of Hormuz and the restoration of disrupted supply chains will take time, prolonging tight market conditions.
Vijay said elevated shipping and insurance costs are also adding to price pressures, with premiums for vessels transiting the Strait of Hormuz rising sharply from previous levels, embedding a higher cost structure into global energy trade.
He said these added costs, combined with gradual recovery in production and logistics, are expected to keep energy prices elevated for an extended period, potentially stretching into 2027.
Vijay highlighted that a prolonged disruption, including a scenario where the Strait of Hormuz remains closed for an extended period, such as 30 days, would significantly affect refinery operations globally, not just in Malaysia, as feedstock flows and product supply chains tighten further.
He said the impact extends beyond fuels to a broader range of commodities, including helium, ammonia and urea, with implications for manufacturing processes and agricultural supply chains.
Vijay said governments and refiners are therefore prioritising diesel and LPG production due to their importance for industrial use and essential consumption, often at the expense of petrol supply and as a result, gasoline was the compromise.
He said that countries like Indonesia are likely to experience greater pressure if disruptions continue beyond the current base case scenario.
Malaysia, meanwhile, has managed the situation well through fuel price adjustments, despite the burden on consumers, but continued policy adjustments will be necessary if supply disruptions are prolonged, said Vijay.
However, he cautioned that if the conflict extends beyond expectations, the resulting shock could surpass the economic disruption seen during the COVID-19 pandemic, underscoring the need for governments to stay on a calibrated policy path while preparing for more severe supply constraints.
-- BERNAMA
