The Federal Reserve Bank of Dallas issues quarterly anonymous surveys of oil executives to gauge current sentiment in the industry, and anticipate future trends.
The current just-released survey indicates an expectation widely shared expectations that high diesel prices are baked in for at least a year.
Federal Reserve of Dallas Quarterly Survey:
How many quarters do you expect it will take for the spread between fuel prices and crude oil prices to return to 2025 levels?
For both gasoline and diesel, “more than four quarters” was the most-selected response. Nearly half of executives (48 percent) expect diesel prices will take more than four quarters to return to 2025 levels, compared with 36 percent who anticipate the same for gasoline.
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One respondent commented:
“Diesel is the mother’s milk of the economy. We are just starting to see the impact on the wider economy.”
We’ve only started to see over the summer more and more incidences of countries saying, ‘OK, well, how do we advance EVs in our country?’” said Joseph Majkut, director of the energy security and climate change program at the Center for Strategic and International Studies. “That’s where I think you will start to see some structural changes.”
The long-term effects of the war won’t be known for years. An S&P Global report last week forecasts that oil, gas and coal may provide only half of the world’s energy by 2060 — down from today’s 80% — without considering the effects of nearly closing the Strait of Hormuz.
“Whether the effective closure, and the associated longer-term risks, results in permanent demand destruction for oil and gas, or simply shorter-term demand repression, will become apparent over the next few years,” the report said.
Signs of flagging demand are emerging. Carbon dioxide emissions from energy are down by 0.5 percent this year, according to recent estimates. That defies a century-long trend of rising energy emissions with occasional decreases, the last of which came in 2020 during the pandemic.
From a blip to a shift: Ninety-five countries initially resorted to some mix of consumer support in response to the energy shortage, such as subsidies, tax holidays or price caps, according to the International Energy Agency.
- The Strait closure took 14 million b/d off the market: That’s roughly 14% of projected 2026 global supply—sending diesel up 58% and jet fuel up 106% year-over-year.
- U.S. oil production doesn’t fully protect Americans: Middle Eastern crude yields more diesel and jet fuel per barrel. The region also supplied 20% of seaborne jet fuel before the conflict.
- Relief will be slow even after fighting stops: The EIA expects that restarting production and refining will take months. Elevated diesel and jet fuel prices could persist well into the recovery.