Robert Auers, Manager of Refined Fuels for Novi Labs, discussed why refined-products prices and refining margins have been especially volatile in 2026
At the opening day of RBN and Novi's School of Energy in Houston, Auers covered the Refined Products markets: what’s driving supply and demand, what’s impacting the prices, and what we can expect for the future.
Refining margins have become increasingly volatile in 2026, as the short-term supply curve for refined products is exceptionally steep. Refineries cannot quickly add capacity or meaningfully increase output once utilization is already high. As a result, even a modest demand increase or a supply disruption can sharply lift product prices and crack spreads.
The reverse is also true: when demand weakens, surplus barrels can quickly pressure prices because refiners have limited flexibility to reduce output without sacrificing operating efficiency. This dynamic reached an extreme during the COVID-19 demand collapse in 2020, when some crack spreads briefly turned negative.
This sensitivity has intensified as the loss or disruption of Middle Eastern and Russian supplies has shifted the available product-supply curve to the left. With fewer marginal barrels available to balance the market, relatively small changes in refinery outages, exports, inventories or consumption can produce outsized swings in margins. Diesel is particularly exposed because global supply remains constrained and demand is comparatively resilient, leaving the market with little cushion when disruptions occur.
Longer term, however, as discussed in our Future of Fuels report, diesel-demand growth is expected to flatten relative to historical trends as efficiency gains, electrification, and changes in transportation reduce the need for additional refining capacity. That outlook discourages refiners from committing capital to major new projects.
