Although Brent crude has fallen by about 12 percent since the end of July 2026, drivers and carriers should not expect an equally rapid drop in diesel prices, according to analysts at Malcom Finance in their commentary on oil prices over the past week. Crude oil quotes are increasingly driven by geopolitical events and expectations regarding the development of the conflict in the Middle East, rather than a lasting improvement in the fuel market situation. At the same time, the restructuring of global oil transport routes and persistent logistical disruptions mean that even an OPEC+ decision to increase production may not be enough to calm the market. Limited refinery capacity is also becoming an increasing problem, meaning that diesel prices are increasingly determined by the availability of finished fuel rather than the price of crude oil itself. Although Poland still belongs to the countries with relatively low fuel prices in the European Union, its price advantage over the EU average is systematically shrinking.
Despite recent price hikes, Poland remains among the countries with relatively low fuel prices in the European Union. According to the latest data from the European Commission, the average price of a liter of Pb95 gasoline in Poland is 1.76 euros, compared to the EU average of 1.85 euros, while diesel is 1.88 euros against an EU average of 1.96 euros per liter. This means that fuels in Poland are approximately 5 percent (gasoline) and 4 percent (diesel) cheaper than the EU average, respectively. However, this advantage has been systematically decreasing over the last few weeks.
Last week, fuel prices in Poland rose significantly. The price of Pb95 gasoline increased by 23 groszy per liter, while diesel increased by 33 groszy per liter. Although Brent crude has fallen by about 12 percent since the end of July, this does not automatically mean a rapid drop in diesel prices. Brent at around 85 USD per barrel reduces cost pressure for carriers, but the entire drop in oil prices cannot be automatically passed on to fuel prices. As long as the most important export routes remain restricted and refinery margins remain at record levels, diesel prices will likely fall much more slowly. The market has reduced the geopolitical risk premium, but physical supply constraints remain valid.
Record refinery margins continue to keep diesel prices high
Since the end of July, Brent crude quotes have remained exceptionally volatile. Within a few days, the price fell from nearly 97 to about 85 USD per barrel, although it rebounded sharply several times along the way. The market reacted primarily to information from the Middle East: signals of a possible de-escalation of the conflict between the United States and Iran led to sharp price drops, while reports of further attacks and tensions quickly reversed this trend. This shows that currently, geopolitical events determine oil valuation to a much greater extent than supply or demand data.
At first glance, Monday’s drop in Brent quotes by nearly 7 percent looked even more spectacular, but it was partly due to a technical change in the futures contract used to determine the current oil price. After accounting for this effect, the actual decline was about 4.7 percent in one day. This is still a very strong move, showing that investors quickly reduced their earlier valuation of the risk of oil supply disruptions and considered the probability of further conflict escalation to be lower than just a few days earlier.
The market bet on de-escalation twice
In recent days, the market has twice priced in the possibility of a de-escalation of the conflict in the Middle East. The first wave of declines appeared after the United States and Iran suspended mutual attacks. Investors concluded that the chance for a diplomatic solution was growing, and thus the risk of oil supply disruptions from the Persian Gulf region was decreasing. Brent prices fell, even though shipping through the Strait of Hormuz remained restricted and the conflict was not formally ended. The market therefore began to price in expectations regarding the future development of the situation rather than its current state.
However, the optimism proved short-lived. Subsequent reports of military actions and announcements of further strikes quickly restored concerns about supply security, causing a sharp rebound in oil prices. An additional impulse was the drop in US oil inventories to their lowest level since 2018, which reinforced the belief that the market remains sensitive to any supply disruptions.
At the beginning of this week, prices began to fall again following Donald Trump’s declarations about continuing talks with Iran. Although Tehran denied conducting direct negotiations, the signal of possible de-escalation itself was enough to lower quotes again. Today’s level of around 85 USD per barrel, however, shows that investors are not convinced whether the conflict is actually moving toward a resolution or if we are dealing with just another short break in military operations.
For carriers, this means that oil prices are currently reacting primarily to expectations regarding the development of the geopolitical situation, not to a lasting improvement in market conditions. The drop in Brent quotes reduces cost pressure, but in itself does not yet mean a return to stability in the fuel market.
Alternative routes are longer and significantly more expensive
Even where oil is available, its transport is becoming increasingly difficult and expensive. Shipping restrictions in the Strait of Hormuz area forced Saudi Arabia to make greater use of the Petroline pipeline leading to the Yanbu port on the Red Sea. However, this alternative route also came under pressure following threats from Houthi rebels, which prompted some Saudi supertankers to change course and sail around Africa.
Such detours mean not only longer delivery times but also significantly higher transport costs. A tanker’s journey can extend from less than three weeks to nearly seven, and the fuel costs for the ship itself can more than double. Additionally, carriers must account for transit fees through the Suez Canal and technical limitations – the largest tankers cannot pass through the canal with a full load, so some oil must be transported via the Egyptian SUMED pipeline.
Alternative transport routes exist, but they have limited capacity, are much more expensive, and tie up ships for longer. As a result, even with sufficient oil production, deliveries to customers can be slower and more costly, which maintains pressure on fuel prices.
OPEC+ raises production limits, but physical supply remains limited
Intuitively, OPEC+ decisions should improve the situation. Seven cartel countries: Saudi Arabia, Russia, Iraq, Kuwait, Kazakhstan, Algeria, and Oman, agreed to increase production limits from September by another 188,000 barrels per day, continuing the gradual move away from voluntary production cuts introduced in 2023.
However, higher production does not automatically mean more oil on the market. Whether the raw material reaches customers will be decided not only by the scale of production but also by the possibility of its safe transport. Export disruptions in the Persian Gulf region, as well as in Russia and Kazakhstan, meant that previous limit increases did not fully translate into an increase in actual deliveries. As a result, the market remains more sensitive to logistical problems than to decisions about increasing production.
Refinery failures keep diesel prices high
For carriers, what is happening in the finished fuel market is much more important today than the price of crude oil itself. European refinery margins for the production of low-sulfur diesel reached a record level of 74.66 USD per barrel, which shows that the biggest problem is no longer the availability of oil, but the ability of refineries to process it into diesel. In other words, oil is arriving on the market faster than finished diesel.
This situation is compounded by further disruptions in refinery operations. After the Houthi rebel attack, Saudi Arabia took the Jizan refinery out of service, and some production was also halted at the Kuwaiti Al-Zour refinery. At the same time, Ukrainian attacks on Russian refineries limit the possibilities for exporting gasoline and diesel from Russia. As a result, less finished fuel is reaching the global market, even though the supply of crude oil itself remains relatively stable.
This is why diesel prices are currently not following Brent crude quotes. The price of the raw material may fall sharply under the influence of information about a possible de-escalation of the conflict, but rebuilding fuel production requires much more time. Damaged refineries cannot be restarted overnight, and missing diesel supplies cannot be quickly replaced.
For this reason, even political pressure to lower fuel prices, which Donald Trump spoke about after the publication of very good financial results by ExxonMobil and Chevron, has limited significance today. Diesel prices are currently determined more by the availability of refinery capacity and the efficiency of the global fuel supply system than by the expectations of politicians.
European institutions see the same problem
These conclusions are also confirmed in the latest analysis published by the European Central Bank. Its authors point out that the recent rise in fuel prices in the eurozone is primarily due to record-high refinery margins, not the price of oil itself. They also note that disruptions in refinery operations and restrictions on fuel exports from the Middle East and Russia keep the situation in the diesel market tight, despite the drop in Brent quotes. This means that even if pressure on raw material prices weakens, drivers and carriers may not feel it in fuel prices at stations for some time.
Source: Malcom Finance