Key takeaways: Goldman Sachs says diesel prices may need to remain elevated until 2027 in order to curb market demand.

Goldman Sachs forecasts that the average global diesel and jet fuel crack spread in 2027 will exceed $40 per barrel, more than double the normal level.

The Group of Seven announced last week that it would increase crude oil supply, but experts are not optimistic that the move can keep diesel prices low over the long term.

On September 11, 2026, at a truck service area in Miami, Florida, a driver was filling up with diesel. U.S. diesel prices surpassed $6 per gallon for the first time in history.

Goldman Sachs said that, constrained by limited refining capacity and driven by a recovery in consumption as governments and companies restock, diesel prices may remain elevated through 2027.

Nikhil Bhandari, co-head of Asia-Pacific natural resources research at Goldman Sachs, said Monday on the program "Asia Finance Forum": "We need refined product prices to remain high enough to keep demand somewhat suppressed next year." The bank believes diesel prices must stay high to prevent recovering demand from overwhelming already strained refining capacity.

Goldman Sachs forecasts that the average global diesel and jet fuel crack spread — the premium of refined products over crude oil — will exceed $40 per barrel in 2027, far above the conventional level of about $20. Even as the bank expects Brent crude prices to stabilize around $80 per barrel as crude shipments through the Strait of Hormuz gradually return to normal, those high prices will still emerge.

Bhandari pointed out: "If demand rebounds next year, the global refining system may be forced to operate at its highest utilization rate in the past two decades." Baden Moore, resources and energy analyst at brokerage CLSA, said the recent weakening in demand does not mean demand has permanently shrunk. Moore wrote in an email: "The underlying demand for refined products is basically intact." He added that market participants are balancing supply and demand through inventory management, drawing down reserves, reducing consumption and optimizing refining units. He also mentioned that meeting current demand while completing a global inventory rebuild could take up to two years.

Pressure on the supply side

Goldman Sachs pointed out that recovering refined product demand will also clash with a tight refining network. The bank expects refining capacity to continue "negative growth" in 2026, with refining capacity outside China expected to shrink by about 300,000 barrels per day. According to calculations in Goldman Sachs' September 21 report "Global Refining Supercycle," days of refined product inventory at the end of 2026 may fall below the lowest inventory cover days since 2015.

Bhandari said about 2 million barrels per day of refining capacity in the Middle East remains offline; damage to Russian refining facilities has further tightened diesel supply. He added that U.S. refineries had been operating at high loads to offset the global capacity decline, but they must subsequently carry out long-overdue maintenance, which will temporarily lower refining utilization levels. The recovery in crude oil exports from the Gulf region is also not expected to materially improve refined product supply, as related refined product shipments remain restricted.

The Group of Seven reached an agreement last Friday to release crude oil and refined product reserves over four months, including "advancing large-scale diesel reserve releases" in the first 20 days. Bhandari made the above remarks after that news. After the announcement, diesel prices fell 5.75% in response. But experts are not optimistic that the additional reserve releases can improve refined product supply and achieve long-term price declines. An industry insider said Monday that emergency reserves "may only help us get through this winter" and cannot solve the long-term supply problem. Moore of CLSA said: "Emergency reserve releases can only solve liquidity problems, not the fundamental contradiction in inventories." Releasing reserves only buys buffer time and essentially consumes existing inventories rather than rebuilding them, which instead makes restocking a long-term source of demand.

Bernard Aw, chief Asia-Pacific economist at Coface, agreed. In emailed comments, he said the impact of such reserve releases is "temporary, not structural."