19th September 2026
The price of crude oil is only part of the story – and diesel is currently facing a serious supply problem.
There is something rather strange happening at Britain's filling stations.
The price of crude oil has been hovering around $104 a barrel. That is certainly not cheap oil, but motorists might reasonably expect pump prices to broadly follow the movement in crude.
Instead, diesel prices are still climbing.
The latest figures put the UK average at around 196p a litre, with diesel up by nearly 14p over the past month. Supermarket diesel is averaging around 192p, while prices at some independent and branded stations are considerably higher.
In Wick, I have seen one filling station displaying diesel at £1.99 a litre, with Tesco around three pence cheaper. The prices may have moved since then, but it illustrates the point. Getting close to £2 a litre for diesel is becoming a reality.
So why is this happening when crude oil is around $104?
We don't actually buy crude oil
The first thing to understand is that motorists don't buy barrels of crude oil.
We buy a refined product.
A refinery takes crude oil and turns it into diesel, petrol, jet fuel and other products. The price of those products depends not only on the cost of the crude but also on how much refining capacity is available and how much demand there is for each particular fuel.
At the moment, diesel is in unusually short supply.
That is pushing up the price of refined diesel even when the underlying crude oil price is not rising at the same rate.
The difference between the price of crude and the price of a refined product is often referred to as the refining margin or crack spread.
And those margins have become exceptionally wide.
Reuters reported this week that Asian diesel refining margins had reached more than $87 a barrel, compared with around $22 before the current conflicts disrupted the market.
That is a remarkable change.
Refinery capacity is the problem
Britain has another vulnerability.
Two UK refineries closed in 2025, reducing domestic refining capacity by almost a quarter. The result is greater dependence on imported fuel products.
That means Britain is increasingly dependent on what is happening in the international market for finished diesel rather than simply relying on its own refineries.
And international supplies are currently under pressure.
Refineries in Russia and the Middle East have suffered disruption, while restrictions on shipping and exports have reduced the amount of diesel reaching international markets.
The Atlantic Council says Russian refining capacity has been badly affected and that diesel exports from Russia, the Middle East and Asia fell by around 1.3 million barrels a day in July compared with a year earlier.
That is a huge amount of fuel disappearing from the international market.
Russia matters
Russia is particularly important because it is one of the world's major refiners and exporters of diesel.
Damage to Russian refineries has reduced production, while Russia has also restricted diesel exports.
The result is that countries which would previously have bought Russian diesel have to find alternative supplies.
They compete with everyone else for those supplies.
That pushes up the international wholesale price.
The Middle East is making matters worse
The Middle East disruption is also affecting refined products.
The current problems around the Strait of Hormuz and the disruption to Saudi oil infrastructure have made the movement of both crude and refined products more difficult.
Yet something rather counter-intuitive has happened.
Crude oil has not risen as dramatically as diesel.
Brent actually closed at about $104.87 a barrel on Friday, despite all the disruption.
That is because the immediate shortage is increasingly a shortage of usable fuel and refining capacity, rather than simply a shortage of crude oil in the ground.
The Financial Times has described the situation as essentially a fuel crisis rather than a conventional oil crisis, with shortages of refining capacity and difficulties moving fuel becoming more important than the crude price itself.
[/b]diesel is particularly vulnerable[/b]
Diesel is used for far more than private cars.
It powers lorries, buses, tractors, construction equipment, fishing vessels and many commercial vehicles.
It is also closely linked to other middle-distillate fuels, including heating oil and fuel oil.
So when supplies become tight, there is competition from several different parts of the economy.
This is particularly important for rural areas such as Caithness.
A rise in diesel doesn't just affect someone filling their car.
It can eventually affect the cost of transporting food, building materials and other goods. Farmers, fishermen, hauliers and contractors all face higher operating costs.
Those costs can eventually feed into prices paid by everybody else.
Why hasn't the pump price caught up with the wholesale price before?
There is normally a time lag.
Fuel retailers don't necessarily pay the wholesale price prevailing on the day you fill your tank.
Fuel has to be bought, transported, stored and eventually delivered to the forecourt.
Retailers also have their own margins.
Then there is fuel duty and VAT.
Fuel duty is currently 52.95p a litre on both petrol and diesel. VAT is then charged at 20%, including on the duty.
So more than half of the pump price is accounted for by tax and the underlying fuel cost is only part of what motorists see on the sign.
But taxes don't explain the recent rise.
The important thing at present is the wholesale price of diesel.
The strange relationship between oil and diesel
This is perhaps the most important lesson from what is happening.
It is tempting to look at the oil price every morning and assume that it tells us what will happen to petrol and diesel.
Usually it is a useful guide.
But there are times when the two markets separate.
That is what appears to be happening now.
Crude oil at around $104 a barrel sounds alarming enough. But the real pressure is further down the chain, where refiners are struggling to produce enough diesel and other refined products for the international market.
That explains why diesel can continue rising even when crude oil is broadly stable.
And it raises another question.
What happens if crude oil starts rising again while diesel supplies are already tight?
That is where the situation could become considerably more uncomfortable for motorists and businesses.
For now, the lesson is simple.
Don't just watch the oil price. Watch the price of the finished fuel.
For the driver standing in front of a £1.99-a-litre diesel pump in Wick, it is the second number that really matters.