Refining margins drive real oil costs above $140 per barrel

While crude oil benchmarks like Brent and WTI are widely cited, the actual cost to end consumers is driven by refined products such as diesel, gasoline, and aviation fuel. When adding the refining margin, or ‘crack spread’, to Brent prices, the average cost to the consumer currently sits between $140 and $180 per barrel.

Refining margins remain high due to a global capacity deficit of over 10%. In Europe, refining margins reached a record $50 per barrel this summer, while diesel margins hit $100 per barrel, pushing the total cost of diesel to a record $200 per barrel.

Supply constraints are being driven by geopolitical factors and infrastructure damage. Middle Eastern refinery operations are approximately 25% below pre-February levels due to physical damage and export restrictions in the Strait of Hormuz and Bab al-Mandab. Additionally, Russian refineries are operating at roughly 40% below capacity following drone attacks, and a ban on refined product exports has been extended through the end of October. China has also limited refined product exports since March, operating refineries well below capacity, while the United States accounts for over 20% of global exports.