The recent developments in the global oil market and the rising inflation have begun to impact consumption of petroleum products around the world.

The ongoing war in Ukraine has sent prices of essential commodities spiralling worldwide and the International Monetary Fund believes this wave of inflation will last longer than its expectations.

While gasoline is an important transportation fuel and a good indicator of oil demand performance, diesel and its current prices has also had a significant impact on the industrial sector, hence increasing inflationary pressure.

Gasoline and diesel are the main fuels that shape the aggregate global demand. For example, in 2019 in the US, which is the largest global consumer of oil, gasoline consumption reached 9.3 million barrels per day and diesel consumption hit 4.1 million barrels per day, making a total of around 13.4 million barrels per day. Thus, gasoline and diesel comprised 64 percent of the total US petroleum demand of 20.9 million barrels per day.

In Europe in 2019, gasoline consumption was around 2 million barrels per day, compared to 6.4 million barrels per day for diesel fuel, totalling nearly 8.4 million barrels per day. This was 59 percent of the total petroleum demand of 14.3 million barrels per day in Europe in 2019, according to data from the Organization of the Petroleum Exporting Countries.

Record-high diesel prices have further pushed up the cost of consumer goods, all of which are transported by diesel-powered trucks. In the US, diesel prices hit an all-time high of over $5.10 a gallon, well above gasoline prices.

Diesel and gasoline prices began to rise to record highs in the first half of March due to Russia’s invasion of Ukraine and subsequent sanctions, as well as due to the post-pandemic economic recovery, which has led to steady demand growth.

According to various reports, between 15 percent and 20 percent of the acceleration in commodity price increases was due to higher fuel costs.

Diesel is needed for many industrial processes. Much of the machinery used by the construction and agriculture sectors is fuelled by diesel.

While gasoline prices are usually in the spotlight because of their direct impact on consumer spending, diesel prices have quietly surpassed previous highs.

Moreover, according to data from the US Energy Information Administration, diesel stocks have dropped to their lowest levels in years. They have fallen by nearly 70 million barrels in the past six months, their lowest level since 2014. Only 112 million barrels of diesel remain in storage, compared with 141 million barrels a year ago. Inventories are 20 percent below their five-year average prior to the pandemic, according to industry reports.

Some reports indicate that if US distillate inventories continue to decline, they could reach their lowest levels in more than two decades.

Russia has cut gas supplies to Poland and Bulgaria, which could force Europe to switch to other fuels, such as diesel, to fill the gap, thus exacerbating the diesel challenge expected in the summer months. As a result, there are now concerns that US diesel prices could exceed $6 a gallon.

Diesel exports from the Middle East to Europe are on the rise, since the war between Russia and Ukraine has pushed prices up sharply, making exports from the Middle East and other Asian countries an attractive option for refiners.

Unlike crude oil, for which OPEC and OPEC+ support market rebalancing, product markets are controlled completely by consumer behavior. Prices have an impact on consumer spending. Due to the routine seasonal increase in summer driving and travel, gasoline and diesel rebalancing needs to be primarily supported by prices and production shifts from refining side.

As such, over the next months, the market focus will be on gasoline and diesel rather than crude oil.

• Hassan M. Balfakeih is an oil demand specialist and former chief oil demand analyst at OPEC Secretariat.