Tom Kloza, chief energy advisor at Gulf Oil, put a number on the physical damage that has been done to the global fuel system this year. “The world has lost about 7 million barrels a day of refining capacity, almost all of it to drone impacts russia, the persian gulf, and now in the red sea,” Kloza said. The lede is that unmanned aircraft, operating in three different theaters, have taken out a meaningful share of the world’s ability to turn crude into usable fuel.
Three Conflicts, All Live at Once
Kloza framed the geography plainly: “You’ve got three wars, three vital geopolitical areas, and three places where a lot of refineries have been knocked out. And that leaves us short.” The word doing the work in that sentence is “three.” These are simultaneous losses, not sequential ones. In a normal cycle, capacity that goes offline in one region has time to be absorbed while other regions run flat out. That mechanism is not available right now. Reuters reported this week that half of Russia’s top diesel-producing refineries have cut back output after drone strikes, and the outages in the Persian Gulf and Red Sea corridors are stacked on top of that.
Refining Is the Bottleneck
This is the part most fuel-price coverage misses. A story about diesel is usually treated as a story about oil, and oil stories are told through barrels produced, OPEC quotas, and pipeline politics. Kloza is describing something different. Crude can be abundant while diesel gets scarce, because the constraint is the capacity to process the crude into product. A refinery is a large, complex industrial installation with heat, pressure, and specialty metallurgy. When a drone puts a hole in a distillation tower or a hydrocracker, the barrel of oil that would have fed it does not automatically find another home. It sits.
The scale matters here. CNBC reported that diesel accounts for about 30 million barrels a day of roughly 100 million barrels a day of total global oil consumption. Diesel moves trucks, trains, ships, farm equipment, and construction fleets. It is not a niche cut of the barrel.
Zero Tolerance for a Bad Day
With slack gone from the system, the market’s response function has changed. “The market is proving that it has zero tolerance for any refinery problems,” Kloza said. The recent U.S. evidence is on point: CNBC cited price spikes of 40 to 60 cents per gallon in Chicago following problems at ExxonMobil (NYSE:XOM) and Valero (NYSE:VLO), per price spikes of 40 to 60 cents per gallon in Chicago following problems at ExxonMobil’s Joliet facility and Valero’s Port Arthur refinery. Neither of those events involved a drone. They were ordinary domestic refinery hiccups. In a market with cushion, they get absorbed. In this one they do not.
An “Untethered” Product
Kloza’s warning on where diesel goes from here used a specific word worth pausing on. “On diesel we could look back at this and say, remember when we thought that $6.47 was high, according to Gulf Oil? Unfortunately that’s an untethered market and that could go crazy,” he said. Untethered is the operative term. The usual anchors, spare refining capacity, product arbitrage across regions, and the option to swap a barrel of crude for a barrel of finished fuel, are all weaker than they were a year ago. Prices in an untethered market do not have to make sense against the cost of the input.
Why This Is Structural
The reason to treat this as a durable change rather than a headline is the repair timeline. Distillation units, cokers, and hydrotreaters damaged in active conflict zones do not come back on a schedule set by the market. They come back on a schedule set by whether crews can safely reach the site, whether long-lead equipment can be sourced, and whether the facility can be defended long enough to complete the work. None of those constraints resolve while the strikes continue. The U.S. Energy Information Administration’s Annual Energy Outlook 2026 projects U.S. refinery utilization remaining above 84% through 2050, a reminder that this industry runs hot even in calm periods. There is not a lot of headroom to give back.