You do not need to follow oil markets to feel this one. Your local gas station already knows the story.
Fuel supplies in the United States and Europe have gotten extremely tight. The reason is a one-two punch from the Middle East and Russia. In the Middle East, conflict has flared up again.
That is a narrow waterway where a huge share of the world's oil and fuel passes.
At the same time, Ukraine has been targeting Russian refineries. That has cut Russian fuel exports, squeezing the global market from another angle.
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The refined products team at FGE NexantECA is led by Eugene Lindell, who commented: "The re-ignition of war in the Persian Gulf casts a great big question mark over third-quarter Persian Gulf runs." In plain English - the fighting makes it unclear how much fuel the region can actually ship out in the coming months.
The price signals are screaming. A measure called the 3-2-1 crack spread - which is basically the profit refineries make when they turn crude oil into gasoline and diesel - has hit a record in the United States.
Across the Atlantic, the story is similar. European diesel refining profit is at a level the region has not seen since at least 2011.
The tightness is not just a blip. Global fuel supplies were already strained before the latest fighting. Persian Gulf crude stopped flowing to some buyers, forcing refineries - especially in Asia - to cut back how much fuel they produce. Meanwhile, demand for oil products keeps growing. Wood & Company analyst Jonathan Lamb put it plainly: "Oil products demand continues to grow steadily, outstripping supply growth."
The catch is that there is no obvious exit ramp. Lamb added that it is "difficult to see sufficient major new refinery projects to be started in the current environment." In other words, nobody is building enough new plants to ease the pressure anytime soon.
On top of that, a few wild cards are lining up. A breakdown of the US-Iran truce threatens to keep the Strait of Hormuz risky. Refineries are about to shut down some capacity for seasonal maintenance, which always tightens the market further. And a heat wave in Europe may force some plants to reduce how much crude they process.
All of this adds up to a fuel market where prices stay high and margins for refineries stay fat. Higher costs ripple through the economy - into shipping, travel, and anything that runs on diesel or gas.
The bottom line: tighter fuel supplies are not a one-week story. They look like the new normal until something changes - a ceasefire, new refineries, or a drop in demand. For now, watch the Strait of Hormuz and the thermometer in Europe. Both will tell you where fuel prices head next.
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