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The Energy Report

Phil Flynn
http://www.pricegroup.com/
pflynn@pricegroup.com


Stop Hitting the Refineries! The Energy Report 09/14/2026

After the diesel crack spread hit another record high — traders were quoting $113.91 a barrel on Friday — President Trump called on Ukraine to stop hitting Russian oil refineries.

Mr. Trump said Mr. Zelenskyy has one thing to do: he has to stop knocking out diesel fuel in Russia. Let him go after targets, but not diesel, because he’s causing a shortage of diesel. “Don’t hit diesel fuel, because that’s hurting the world,” the President said from Ireland. “This isn’t done by the Middle East. This is done by what’s happening with Russia and Ukraine.” Moscow has been saying the same thing for months, and I’m sure the rest of Europe hopes somebody listens, because the shortage of diesel has been caused in large part not by a lack of crude oil, but by a lack of refining capacity.

As I’ve said before, this diesel shortage didn’t start last Thursday. It started years ago with the green-energy movement — short-sighted policies and the belief that climate change was some existential risk that meant we should give up common sense, stop questioning the science, and just stop producing fossil fuels. Especially that “dirty” diesel. So, we closed refineries. Europe decided to become more dependent on Russian product. Then the war came, and the barrels they used to import weren’t there anymore.

Oil Price reported that the White House is weighing the this add U.S. refining capacity. Plants are at 98%. Diesel is above $6 a gallon for the first time. Trump discussed it with nearly a dozen refiners. No decision yet.

Executives said federal money works faster on expansions and efficiency at existing plants. A new refinery would take years and billions. Though we know of smaller projects that can be done cheaper.

DPA lets the president fund and prioritize capacity tied to national defense. In April, Trump already declared domestic production, refining, and logistics essential under Section 303.

Utilization sat above 95% for three months — longest stretch since 2000. Phillips 66 sees about 7 million bpd of refining offline in Asia and the Middle East, plus 1.4 million in Russia. U.S. diesel stocks are 13% below the five-year average as Middle East and Russia disruptions squeeze fuel supply.

Trump laid the groundwork in April, when he issued a presidential determination declaring domestic petroleum production, refining and logistics capacity essential to national defense. The order authorized purchases, purchase commitments and financial instruments under Section 303 of the DPA to increase that capacity.

U.S. refiners have little spare room today. Refinery utilization reached 98% in late August after spending three consecutive months above 95%, the longest such stretch since 2000.

That output has become increasingly valuable as refinery capacity disappears elsewhere. Phillips 66 estimated last month that roughly 7 million bpd of refining capacity was offline in Asia and the Middle East, with another 1.4 million bpd unavailable in Russia.

U.S. diesel inventories are now 13% below their five-year average. Diesel prices crossed $6 per gallon this week as disruptions in the Middle East and Russia squeezed global fuel supplies.

Even the shutdown of the Saudi East-West pipeline — the one that caused quite a panic after drones out of Iraq hit the pumps — is not as big as the refining problem around the world. That line matters. It was moving 4 to 5 million barrels a day around a closed Hormuz. Yanbu only has days of export stocks if it stays dark. But crude sitting in a tank is not diesel in a truck. You still have to refine it. That’s the bottleneck.

Look at what’s already gone. In the United States alone: LyondellBasell’s Houston plant — about 264,000 barrels a day — shut in March 2025. Phillips 66’s Los Angeles refinery — about 139,000 barrels a day — ceased crude processing in October 2025. Valero’s Benicia plant in California — 145,000 barrels a day — stopped refining earlier this year. Add the conversions: Phillips 66 Rodeo and Marathon Martinez turned into renewable-diesel sites instead of crude plants. EIA has U.S. operable distillation capacity down to about 18.2 million barrels a calendar day as of January 1 — more than 250,000 barrels a day lower than a year earlier, and hundreds of thousands below the 2020 peak. California has taken a particular beating. Fewer plants, unique fuel specs, and now the most expensive diesel in the country.

Europe was worse. The U.K. lost Grangemouth and Lindsey in 2025 and is down to four operating sites. Continent-wide, hundreds of thousands of barrels a day of capacity walked off last year, and the forecast is still for European processing to shrink further this decade even while plants that are left are running near their limits. Phillips 66 has been telling investors roughly 7 million barrels a day of refining capacity is offline in Asia and the Middle East, plus another 1.4 million in Russia.

Ukrainian strikes have hammered Russian runs. Moscow banned diesel exports to protect its own pump. Gulf product exports collapsed after the Iran war. U.S. refiners are already at 98% utilization. Distillate inventories are deep below the five-year average. National diesel is over $6 a gallon. That is not a crude story. That is a stills-and-crackers story.

California is the hard case — regulations, unique specs, and plants already converted or dismantled. The Gulf Coast and idle capacity elsewhere are the easier lift. There’s also talk of the first new U.S. refinery in nearly 50 years at Port of Brownsville, and of trying again on assets like St. Croix. The DPA doesn’t print diesel overnight. It does tell the market that The Trump adminstrations get it that the problem is downstream, not just upstream.

So we need to stop hitting the refineries that still run. Stop pretending we can close ours, convert ours, regulate ours into the ground, and then act shocked when diesel cracks print triple digits.

Crude can sit at $100 and you still have a fuel crisis if the stills are gone. Trump named the immediate pressure — Ukraine knocking out Russian diesel — and he’s reaching for wartime industrial tools at home because American plants are already maxed out. Europe is paying for years of shutting capacity and leaning on Moscow. California is a preview of what happens when you retire stills and keep demand. The East-West pipeline scare is real. The refining shortage is bigger.

Watch the diesel crack that has eased a bit.

Still oil did sure on the fact that Saudi Arabia had to shut down down its East-West pipeline as a precaution after drones launched out of Iraq slammed into pumping stations in the Riyadh and Medina regions. There are injuries. There’s fire damage. The satellite photos show scorched ground and smoke curling up over the pipeline route. Baghdad confirmed the drones came out of Maysan province, right on the Iranian border — and moved fast. They fired the operations commander, seized a drone launch platform, and shut down a few of the Iran border crossings. Nobody’s claimed it. The Iran-backed militia umbrella group everybody’s looking at? They’re denying it. And folks, I don’t think anybody in this market is buying that denial for one second.

Here’s why you need to care about this pipeline specifically. This isn’t some spare tire sitting in the trunk. This is THE workaround — the kingdom’s lifeline while Iran keeps the Strait of Hormuz locked down. It runs 745 miles, Abqaiq in the east all the way to Yanbu on the Red Sea, and it’s been carrying 4 to 5 million barrels a day. That’s 4-5% of global supply moving through one line! Red Sea liftings have more than doubled because the Gulf route is basically closed for business. You hit those pumps, you hit the only reliable door Saudi crude has left that doesn’t run straight through a war zone.

And that’s the bigger story here. First they lock down Hormuz. Then the Houthis start choking off Bab el-Mandeb. Now somebody’s going after the overland escape hatch too. That’s not random — that’s coordinated pressure on both flanks of the Arabian Peninsula. Brent’s trading north of $104 a barrel right now, and this is exactly how you keep it up there.

President Trump was asked about it over in Dublin — was Iran behind this? He didn’t hedge: “I think they are, probably they are.” He said he’d talked to Crown Prince Mohammed bin Salman, called him “a good friend,” and the message was everything’s going to work out fine.

He also said the Houthis reached out, telling him they don’t want the U.S. dragged into this — they’re letting most ships through except for one country they’re “not too happy with.” Phil Flynn Energy Report — Natural Gas

Monday, September 14, 2026

Natural gas is a bit higher this morning. October futures are trading around $2.89–$2.90, up roughly 2% after last week’s softer close. Not a moonshot, but the bid is there.

The weather story is doing some of the work. Heat is hanging on longer than the calendar says it should. Fox Weather and the 6-to-10-day outlooks still have large parts of the country running above normal well into next week. South and South Central stay hot. That’s extra power burn for air conditioning when the shoulder season is supposed to be winding down.

Wind is also part of it. When wind generation drops, gas-fired plants pick up the slack. Lower wind plus lingering heat equals more gas into the power stack. That’s the near-term support.

Storage is still filling. The last EIA print (week ending Sept. 4) showed a 40 Bcf build to 3,254 Bcf. Production remains strong. The market isn’t tight on paper in the U.S. right now. What is tight is the weather window and the export pull.

Europe is the other side of the ledger. Their storage is below normal and well below last year. Germany is only about 55–56% full in mid-September. The EU as a whole is lagging seasonal norms after a slow injection season and a tight LNG market. They’re hoping for a warm winter. If they don’t get it, they will need more LNG. That bid still finds its way back to U.S. cargoes.

So you’ve got a U.S. market with decent supply, a 10-day forecast that keeps cooling demand alive, weaker wind helping gas generation, and a European market that is short inventory and hoping the weather cooperates. That’s why gas is a little higher today instead of rolling over.

Watch the next storage print and whether those 10-day maps stay warm. If the heat fades and wind picks up, this bounce gets tested. If Europe stays lean into fall, the LNG pull doesn’t go away. So the main thing to do today is to make sure that you download your fox weather app to keep up with the latest swings on the weather you should also stay tuned to the Fox Business Network because they’re the only network in America that’s truly invested in you if you need to get set up for your trading or if you need the daily trade levels or my special reports also you have to do is call me at 888-264-5665 or you can e-mail me at pflynn@pricegroup.com.



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Phil is one of the world's leading energy market analysts, providing individual investors, professional traders and institutions with up-to-the-minute investment and risk management insight into global petroleum, gasoline and energy markets. Phil's market commentary, fundamental and technical analysis, and long-term forecasts are sought by industry executives, investors and media worldwide.

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Past performance is not indicative of future results. The information and data in this report were obtained from sources considered reliable. Their accuracy or completeness is not guaranteed and the giving of the same is not to be deemed as an offer or solicitation on our part with respect to the sale or purchase of any securities or commodities. Alaron Trading Corp. its officers and directors may in the normal course of business have positions, which may or may not agree with the opinions expressed in this report. Any decision to purchase or sell as a result of the opinions expressed in this report will be the full responsibility of the person authorizing such transaction.

Contact Phil at 1-888-264-5665 or pflynn@pricegroup.com.