Why the US, the World’s Biggest Oil Producer, Still Can’t Rein In Energy Prices

Recent gains in oil prices are once again adding to inflation pressure in the US. Treasury yields have also remained elevated, reflecting concerns about prices.

Yet the US is already the world’s largest oil producer. Why can’t the country that produces the most crude simply lower its own gasoline and diesel prices?

In Wall Street Anatomy on September 24, we examine why the US, despite being the world’s top oil producer, still struggles to control domestic energy prices.

1. 13.58 Million Barrels a Day

The US has held its position as the world’s largest oil producer since 2018.

In 2025, US crude oil and condensate production averaged 13.58 million barrels a day, accounting for about 15.8% of global output.

Russia ranked second at 10.16 million barrels a day, followed by Saudi Arabia at 9.73 million.

Texas alone produced about 5.8 million barrels a day, equal to 43% of total US output. If Texas were a country, it would rank as the world’s fourth-largest oil producer.

2. Light Crude From Shale

The shale revolution is at the center of the increase in US crude production.

Shale is a dense rock formation. Producers inject high-pressure water and sand into the rock to create fractures, then extract crude oil and natural gas through those cracks. The process is called hydraulic fracturing.

Crude produced this way is known as tight oil, more commonly called shale oil. The natural gas that comes with it is shale gas.

US shale crude is characterized by its light, low-sulfur quality. Light crude is less dense and more fluid. WTI and US shale oil are representative examples.

By contrast, crude from Canada’s oil sands and from Venezuela is closer to heavy crude, which is thicker and more viscous.

Middle Eastern crude often falls between the two, though many grades lean toward the heavier side. Saudi Arabia’s Arab Light is a representative example of crude with relatively high sulfur content.

3. US Refineries Are Geared to Heavy Crude

The problem is that US refineries were not built with shale light crude in mind.

Most large US refineries were built before the shale revolution. At the time, the US developed a system designed to import heavy crude and maximize output of gasoline, diesel and jet fuel.

In other words, those refining facilities are strongest at cracking and processing heavy crude.

The shale crude now being produced in large volumes in the US is light crude. As a result, the US exports domestically produced light crude and imports heavy crude better suited to its refineries.

The US exports roughly 3.2 million to 4 million barrels of crude a day, while importing about 6.2 million barrels a day. More than 60% of those imports are heavy crude, and about 63% comes from Canada.

4. Why Not Rebuild Refineries?

That raises an obvious question: Why not reconfigure refineries to handle shale light crude?

In theory, it can be done. In practice, it would cost billions of dollars and take years to complete.

The US has built virtually no new large-scale refineries since the 1970s. Even expanding existing plants requires complex permits and compliance with environmental rules.

With the shift to electric vehicles underway, refiners also have little incentive to commit to major fossil-fuel investments designed to last decades.

As a result, the US market adjusts crude supply through imports and exports rather than refinery overhauls.

5. The US Is the Largest Exporter of Petroleum Products

Because it has large, complex refineries capable of processing heavy crude into gasoline, diesel and jet fuel, the US has become the world’s largest exporter of refined petroleum products.

The country is particularly dominant in liquefied petroleum gas, or LPG, supplying a little more than 40% of global exports.

The US is also one of the world’s largest diesel exporters. It is estimated to supply about 15% to 20% of global diesel trade.

That role has become more important as disruptions at Russian refineries and sanctions have persisted.

6. A Structure That Follows Global Prices

Oil is a globally traded commodity.

If prices in the US fall below overseas prices, refiners and traders will send supplies abroad to fetch higher prices. That is arbitrage.

As exports increase, less supply remains in the domestic market. Prices in the US then rise back toward international levels.

The reverse is also true. If domestic prices fall too far below import costs, imports may decline and shortages can emerge.

In the end, US petroleum product prices cannot stray far from international levels once transport and distribution costs are added.

The same applies to crude. WTI, the US benchmark, moves with Brent, the global benchmark. Even if crude is produced and refined in the US, prices remain tied to the world market as long as trade flows are open.

7. Why Global Oil Prices Are Rising

Brent crude is now holding near $100 a barrel.

The immediate drivers are war and geopolitical risk.

The biggest variable is the war involving Iran and the risk of a closure of the Strait of Hormuz. About 20% of global oil consumption passes through the strait.

Ukrainian attacks on Russian refineries have continued, along with strikes on refining facilities in the Middle East. That has increased disruptions to refining capacity.

Even if OPEC+ eases production cuts, actual output in Saudi Arabia and Russia could still be affected by war, sanctions and facility disruptions. Inventories are not ample either.

The result is a tight supply picture compounded by geopolitical risk, keeping global oil prices elevated. US crude and petroleum product prices are rising for the same reason.

On September 24, US gasoline prices stood at $4.48 a gallon, while diesel was $6.51 a gallon. Compared with a year earlier, gasoline prices were up more than 40% and diesel prices had risen nearly 80%.

8. A Global Diesel Shortage

Other petroleum products are also getting more expensive, but there is a specific reason diesel has risen more sharply.

First, refining disruptions have become a global problem.

Damage to refining facilities in the Middle East and Russia is estimated to have shut down about 10% of global refining capacity. The world may have crude, but it lacks enough refinery capacity to turn it into diesel, jet fuel and gasoline.

Second, US refining capacity is also constrained.

Some refineries closed during the Covid-19 pandemic after demand collapsed. Since then, virtually no new refineries have been built. Even with existing plants running at full tilt, total capacity is structurally difficult to expand.

As diesel shortages deepen in global markets because of disruptions in the Middle East and Russia, US diesel is being exported quickly to South America and Europe.

US refinery utilization has already climbed to about 97%. That leaves little room to raise production further.

Strong exports have also kept inventories low. US distillate inventories, which include diesel and heating oil, have fallen to the lowest level since records began in 1982.

The structure of the futures market also makes stockpiling harder. In a backwardation market, where diesel futures trade below spot prices, companies risk buying diesel at high prices, storing it and later selling it at lower prices. That reduces the incentive for the private sector to build inventories.

Seasonal demand is adding to the strain, including fuel for farm equipment during the autumn harvest, freight demand and winter heating oil demand.

Low inventories, limited refining capacity and strong export demand are all hitting at once. As a result, diesel prices have become highly sensitive to even small changes in supply and demand.

9. Diesel Has a Broader Economic Impact

In the US, gasoline consumption is much larger than diesel consumption.

According to the US Energy Information Administration, or EIA, the country’s oil consumption in 2025 was about 20.3 million barrels a day.

Of that, gasoline consumption was about 8.9 million barrels a day, accounting for 44% of the total.

By contrast, distillate consumption, including diesel and heating oil, was about 3.9 million barrels a day, or about 19% of the total. That is less than half the level of gasoline consumption.

But diesel has a far more direct effect on inflation.

When diesel prices rise, costs increase first for trucking companies and logistics operators. Those costs are then passed on to manufacturers and distributors through fuel surcharges and higher freight rates.

As contracts are renewed and inventories are worked down, the effect shows up in the prices of food and household goods. For consumers, the inflation impact typically comes with a lag of one to three months.

Gasoline affects direct household spending. Diesel, by contrast, spreads through prices across the broader economy through logistics costs.

10. Would a Diesel Export Ban Solve the Problem?

The White House is reviewing a diesel export ban.

The logic is simple. If exports are blocked, more diesel would remain in the US market and domestic prices could fall.

There is also a political motive ahead of the November midterm elections: easing fuel costs for farmers and truck drivers.

But the counterarguments are substantial.

For one thing, refiners could cut production.

Refining crude does not produce diesel alone. Gasoline, jet fuel and fuel oil are produced together in fixed proportions.

If unsold diesel starts piling up in storage tanks because exports are blocked, refiners may have little choice but to reduce crude runs. That would lower output not only of diesel, but also gasoline and jet fuel.

Energy Secretary Chris Wright has also warned that blocking exports could prompt refiners to cut production and send gasoline prices higher immediately.

There are also limits to how much surplus diesel can be redirected to the parts of the US that need it.

A large share of US diesel exports comes from refineries along the Gulf Coast. But pipeline capacity is limited, and marine shipping between US ports is restricted by the Jones Act.

That makes it difficult to quickly reroute volumes to regions with less refining capacity, such as the East Coast.

Higher global prices could also feed back into the US.

The US is the world’s largest supplier of seaborne diesel, providing about 20% of the market, or roughly 1.5 million barrels a day. Europe has relied heavily on US supply after cutting off imports of Russian diesel.

If the US blocks exports, diesel prices overseas would likely rise first.

Prices in the US could fall in the short term. But regions such as the East Coast, which depend on overseas supply, would still be exposed to higher international prices.

In the end, US diesel prices are difficult to fully decouple from global prices.

New York — Park Shin-young, Hankyung correspondent, nyusos@hankyung.com