Overview

Fuel prices are impacted by wider macroeconomic factors and global crude oil pricing, along with more regional variables.

Gasoline: cars and light vehicles, personal travel and commuting

Diesel: freight, manufacturing, transportation (buses, trains, trucks), and agriculture

Jet Fuel: commercial & military aviation and freight

Fuel prices have historically been volatile, influenced by a range of factors including geopolitical events, natural disasters, economic cycles, and technological advancements. For instance, the 1970s oil crisis caused significant price spikes, while advancements in fracking technology in the 2000s led to increased oil production and lower prices. The COVID-19 pandemic also had a dramatic impact, initially causing plummeting prices due to reduced demand, followed by a rebound as economies began to recover.

1970s:  Oil embargoes drive Americans to buy more fuel-efficient cars – environmental regulations placed on fuel

1980s:  US adopts unleaded gasoline. Increased dieselization of the European economy and rising fuel economy standards begin to impact consumption. Advances in refining technology improve supply chain dynamics

1990s:  Sees adoption of cleaner fuels led by the adoption of reformulated gasoline and low-sulfur diesel. Emergence of the biofuels sector.

2000s:  Transformative decade for fuels markets, as biofuels mandates were adopted. Markets shifted to ULSD and US refiners seek to maximize diesel output adoption of sour crudes slates. The oil price spike in 2008 and the global financial crisis led to increases in fuel efficiency and more rapid fleet turnover including hybrid vehicles and EVs.

2010s:  The shale oil revolution provided cheap and plentiful natural gas, allowing US Gulf Coast refineries a competitive advantage to export products, and the US became a net product exporter in 2019. Environmental regulations have driven greater penetration of biofuels into the conventional fuels pool. There has been increased EV adoption and a surge in fuel demand in Latin America and South America. The COVID-19 pandemic led to work-from-home and hybrid work schedules, altering gasoline consumption patterns and driving significant efficiency gains in the aviation sector.

Refined Product Market Dynamics

Factors influencing refined fuels prices include crude oil pricing, refining capacity, fuel demand, seasonal factors such as heating oil consumption, refinery maintenance activity, freight pricing, arbitrage opportunities, specification, location, geopolitical events, transportation mode, terminal costs, taxes, environmental credits, renewable fuel blending, government policies.

Supply and Demand Factors

Overview of global supply and demand dynamics for each fuel 

Diesel

Global demand for diesel is driven by industrial and freight activities. Supply is influenced by refinery capacities and crude oil availability. 

Jet Fuel

Demand is closely linked to the aviation sector. Global events affecting air travel, such as pandemics or economic recessions, can significantly impact jet fuel consumption. 

Gasoline

Consumer vehicle usage primarily drives gasoline demand. Supply is dependent on refinery outputs and the global crude oil market. 

Production levels and refinery outputs

Refinery outputs and production levels are critical in determining the supply of diesel, jet fuel, and gasoline. Refineries adjust their output based on market demand, seasonal trends, and maintenance schedules. Disruptions in refinery operations, such as maintenance shutdowns or unplanned outages, can lead to supply shortages and price increases.

Consumption patterns and demand fluctuations

Economic growth typically boosts demand for diesel and jet fuel, while gasoline demand is more influenced by consumer behavior and vehicle trends. Advancements in fuel efficiency and the rise of alternative energy sources can also affect demand levels.

Diesel

Major producers include the United States, China, and India. Key production regions are those with significant refining capacity. 

Jet Fuel

Produced globally, with major suppliers including the United States, Middle East, and Europe. Key production hubs are often near major airports and transportation hubs. 

Gasoline

The United States, China, and Europe are significant producers. Production regions align with large refining complexes and consumer markets.

Geopolitical influences on supply (e.g., OPEC policies, regional conflicts) 

OPEC policies, regional conflicts, and trade sanctions can all affect crude oil prices and, subsequently, the prices of diesel, jet fuel, and gasoline. For instance, decisions by OPEC to cut or increase oil production can lead to significant price shifts. 

Infrastructure and logistics (pipelines, shipping routes) 

Disruptions in logistics, whether due to natural disasters, technical failures, or geopolitical tensions, can lead to supply bottlenecks and price volatility. 

Demand Factors

Economic Growth and Industrial Activity 

Economic growth and industrial activity directly influence fuel demand. Robust economic conditions typically lead to increased demand for diesel (for freight and industrial use) and jet fuel (for business and leisure travel). Conversely, economic downturns can suppress demand. 

Changes in Consumer Behavior and Fuel Efficiency Standards 

Shifts in consumer behavior, such as a preference for fuel-efficient or electric vehicles, can reduce gasoline demand. Stricter fuel efficiency standards also play a role in decreasing fuel consumption per mile driven, impacting overall gasoline demand. 

Technological Advancements and Their Impact on Fuel Consumption 

Technological advancements in vehicle design, alternative fuels, and energy efficiency can significantly affect fuel consumption patterns. The rise of electric vehicles and improvements in battery technology are gradually reducing dependence on gasoline and diesel. Innovations in aviation technology also aim to enhance fuel efficiency, impacting jet fuel demand. 

Supply Factors: 

• Limited domestic oil production, reliance on imports from Russia, the Middle East, and Africa

• Stringent environmental regulations influencing refining processes and fuel standards

• Well-developed pipeline and transportation infrastructure

Demand Factors: 

• High diesel consumption for transportation and heating

• Significant focus on reducing emissions, promoting alternative energy sources

• Dense air traffic and major international airports driving jet fuel demand

Higher fuel prices compared to other regions, driven by taxes, environmental regulations, and reliance on imports. Significant emphasis on fuel efficiency and alternative energy sources. The region's focus on reducing carbon emissions has led to higher taxes on fossil fuels and incentives for renewable energy. The transition to electric vehicles and stricter emission standards are reshaping the market.

Supply Factors: 

• Major oil-producing region with abundant crude oil reserves

• High refining capacity focused on exporting refined products

• Strategic geographic location for global shipping routes

Demand Factors: 

• Domestic consumption is influenced by economic growth and infrastructure development

• High per capita energy consumption, particularly in countries with subsidies

• Significant jet fuel demand due to major international airline hubs

Lower domestic fuel prices due to subsidies and abundant supply. Export-oriented market with significant influence on global prices through OPEC. As the world's largest oil-producing region, the Middle East plays a crucial role in global supply. Political tensions and conflicts can disrupt supply chains, causing price fluctuations. Investments in refining and petrochemical industries are increasing local value addition.