Goldman Sachs Warns Diesel Prices Likely Elevated Through 2027 As Refining Capacity Struggles

Table of Contents

• You might want to know


• Main Topic


• Key Insights Table


• Afterwards...

You might want to know

1. How long could refinery constraints keep diesel prices elevated, and what would it take to ease them?

2. Will short-term emergency releases of crude and products meaningfully lower retail diesel prices long term?

Main Topic

Goldman Sachs projects that diesel prices may need to remain elevated through 2027 as the global refining system grapples with constrained capacity while consumption recovers. The bank argues that higher product prices are necessary to induce some level of demand destruction and prevent a rebound in consumption from overwhelming limited refinery output. This assessment reflects a combination of inventory dynamics, damaged or offline refining capacity, and the time required to replenish stocks after recent draws.

One driver behind Goldman’s outlook is the difference between refined-product premiums and crude prices, commonly known as crack spreads. Goldman forecasts that global diesel and jet-fuel crack spreads will average above $40 per barrel in 2027, which is more than double the historical norm of around $20. Even with Brent crude expected to stabilize near about $80 per barrel, the bank sees the premium for refined products staying high because refineries will remain the constraining link in the supply chain.

The core of the problem is the interplay between recovering demand and limited refining throughput. Governments and corporate purchasers have been rebuilding inventories after running down stocks, which adds to demand even as broader economic activity recovers. Goldman suggests that if there is any meaningful demand rebound, the global refining system would need to operate at the highest utilization rates seen in the past two decades to keep pace. Achieving and sustaining such utilization is difficult given current capacity trends and planned or unplanned maintenance cycles.

Several regional and structural factors tighten the market further. Goldman and other analysts point to roughly 2 million barrels per day of Middle Eastern refining capacity that remains offline, while damage to some Russian facilities has reduced supplies of diesel specifically. Outside China, refining capacity is expected to contract in 2026, with Goldman estimating a net decline of about 300,000 barrels per day. When combined with deferred maintenance and capacity reductions elsewhere, the available refining throughput may not be sufficient to both replenish inventories and meet ongoing consumption growth.

Analysts from other firms echo parts of Goldman’s view while adding nuance. For example, brokerage CLSA notes that recent demand weakness does not necessarily equate to permanently lost consumption — rather, buyers have balanced markets through measures such as inventory management, reserve drawdowns, consumption curtailment, and refinery optimization. Such measures can smooth short-term imbalances but do not eliminate the need to rebuild stocks. CLSA estimates that replenishing global inventories while simultaneously meeting steady or recovering demand could take up to two years.

Policy responses have attempted to relieve near-term pressure. The Group of Seven announced a coordinated release of 100 million barrels of crude and refined products over four months, with a heavy, early diesel component intended to blunt immediate winter market tightness. This announcement led to a prompt decline in European gasoil futures, but many industry voices caution that such moves are temporary measures. Emergency stock releases can provide short-term liquidity or price relief, but they do not address the underlying structural reductions in refining capacity or the longer-term task of rebuilding commercial inventories.

Industry leaders and economists have warned that emergency releases may only buy a season or two. Saudi Aramco’s CEO noted that such actions might help get through a winter but cannot solve long-term stock shortages. Similarly, analysts argue that releasing reserves draws down stocks rather than rebuilds them, so restocking later becomes an additional source of demand that could sustain price pressure.

Refinery utilization patterns and maintenance cycles also matter. U.S. refineries that have been running at elevated rates to offset global capacity losses will require routine or deferred maintenance at some point, temporarily reducing runs and tightening product availability further. The pace at which offline Middle Eastern and other regional refining capacity returns — and the extent of investment to expand or modernize global refining — will determine how quickly supply can catch up with demand.

In sum, Goldman’s outlook combines immediate supply disruptions, anticipated negative refining capacity growth outside key regions, inventory dynamics driven by restocking, and the limited efficacy of short-term policy releases to argue that diesel prices may require sustained upward pressure through 2027. The bank’s view is that without higher product prices to temper demand, constrained refineries will continue to face outsized strain, keeping crack spreads and retail diesel prices elevated for an extended period.

Key Insights Table

Afterwards...

Looking ahead, the balance between refinery capacity restoration, fresh investment in refining, and the pace of inventory rebuilding will determine how persistent diesel price pressures prove. If offline facilities and damaged units are repaired and new capacity is brought online, price relief could materialize earlier. However, if capacity constraints persist and restocking continues apace, markets may need elevated price signals for an extended period to align demand with limited supply. Policymakers’ temporary releases can provide breathing room, but durable solutions will likely require structural responses from the refining sector and coordinated global inventory management.