IEA Says Global Diesel Shortages Could Persist in 2027

In the run-up to the International Energy Agency’s meeting on Thursday, the agency revealed that its data showed that shortages of diesel on global energy markets could persist into much of 2027. The IEA meeting is aimed at working out how member countries are going to structure additional releases from their strategic oil reserves so that energy markets can be calmed down.

Earlier in March, IEA members agreed to release over 400 million barrels of oil in a staggered way so that prices that were skyrocketing when the Iran war broke out could be stabilized.

The agency is especially concerned about the available supplies of diesel because diesel is the most widely used form of oil in agriculture, motoring and in industry. When prices of diesel stay elevated for long, they trigger widespread economic and political pressure. This is because high diesel prices trickle down to the prices of commodities used in everyday life, and this resultant inflation adversely affects economic growth.

The IEA says high diesel prices have eroded real incomes, spiked the cost of goods, suppressed economic activity and resulted in rising inflation around the world. Many central banks have already started raising interest rates to curb rising inflation.

The agency says that in September, the lost exportable volumes of diesel from Russia and the Middle East stood at 1.3 mbpd (million barrels per day). That volume is equivalent to nearly 5% of total global diesel demand forecast for 2026. Such shortages explain why the price of diesel has stubbornly remained higher than that for gasoline, and yet before the war, diesel was the cheaper fuel.

Strategic reserves of oil have been drawn down over the months as the conflict in the Middle East persisted. As more of these reserves are released, countries are likely to have less to rely on when future shocks happen. The IEA forecasts that this vulnerability could persist for several months next year. Supply could then resume and the reserves could be rebuilt, probably in the second half of 2027.

While not all the agreed releases from strategic reserves were implemented during the quarter running from March to June, the IEA is hoping that the discussions held this time will result in all members implementing the decisions reached.

As energy markets roil from the fallout resulting from the ongoing wars, conglomerates like Berkshire Hathaway Inc. (NYSE: BRK.A) (BRK.B) will be reassessing their forecasts for this year in the different sectors like energy, retail and manufacturing that have been impacted by diesel shortages and high energy prices on global markets.

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