Crude oil is no longer the main player: The next energy crisis is quietly erupting in refineries.

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While the market continues to question why oil prices have not made a decisive breakthrough, the real energy shock has quietly shifted its position.

Natasha Kaneva, JPMorgan's commodities analyst, pointed out in the latest report that the adjustment mechanism of this round of energy crisis is undergoing a fundamental shift—pressure is being transferred from crude oil upstream to downstream refined products. Since the outbreak of conflict, Asian refined oil prices have risen by 1.5 to 3 times that of crude oil, and jet fuel crack spreads have soared to an extreme level of $80 to $100 per barrel.

Previously, the International Energy Agency (IEA) warned in April that Europe’s jet fuel inventories could run out in as soon as six weeks, and Kuwait Petroleum Corporation (KPC) has officially invoked force majeure clauses to suspend some shipments.

Consumers do not buy crude oil, but refined fuel. This seemingly simple fact is becoming the core logic for understanding the next stage of the current energy crisis. JPMorgan believes that, with limited refining capacity and a sharp decrease in Middle Eastern refined oil exports, refined oil prices—rather than crude oil prices—will become the main channel for demand destruction and have a substantial impact on global aviation, logistics, and consumer sectors.

Inventories: The largest supply gap in history, yet crude prices remain unusually steady

Since the outbreak of this round of conflict over more than two months, the market is faced with a paradox puzzling analysts: this is recorded as the “largest-scale crude oil supply disruption in history,” yet Brent crude has only averaged around $100.

JPMorgan data shows that global crude inventories are experiencing the largest recorded decline. If the current trend continues, inventories will reach "operational stress" levels in a few weeks, and fall to the "operational bottom line" by September.

Kaneva explains in the report that the relative stability of oil prices does not reflect market indifference to the crisis, but rather the market’s recognition of an even harsher reality: a supply shock of this magnitude cannot be absorbed by the crude oil market alone, the system lacks sufficient elasticity. Refiners in Asia and Europe have already been forced to cut utilization rates—down 2.1 million bpd in March, further widening to 3.8 million bpd in April. Meanwhile, the Middle East itself has lost about 4.7 million bpd of refined oil exports.

According to a Bloomberg report in April, Kuwait Petroleum Corporation (KPC) has officially notified customers that it is invoking force majeure clauses and suspending crude and refined oil deliveries to ships unable to enter the Persian Gulf. Insiders revealed that Kuwait’s oil and gas infrastructure has suffered multiple strikes, current output has dropped to historic lows seen in the early 1990s, and even if the conflict ends, full recovery of capacity will take time.

Refining Mechanism: A zero-sum game, molecular competition among products

To understand why the refined fuel crisis cannot be quickly resolved, it's necessary to understand the physical constraints of refining itself.

JPMorgan elaborates in the report: Essentially, refining is the process of separating a barrel of crude oil into different products by boiling point, a strictly mass-conservation system—what goes in is what comes out, nothing can be created out of thin air. This means refining is a zero-sum game; producing more of one fuel inevitably means producing less of another.

Crude oil itself is not a homogeneous substance. Light crude has smaller molecules, naturally more inclined to produce gasoline and naphtha; heavy crude has more complex molecules, producing more diesel, fuel oil, and residue. In highly complex refineries (such as those in the US), gasoline yield can be increased from about 20% naturally to over 45% through fluid catalytic cracking units, because of the huge number of passenger vehicles globally, modern refineries are deeply optimized for gasoline production.

Jet fuel is positioned in the distillation column between gasoline and diesel as an “intermediate distillate,” usually accounting for 8% to 15% of refinery output. Diesel is also an intermediate distillate, accounting for about 25% to 35%. The key is that jet fuel and diesel compete for the same set of molecules in the barrel, meaning direct competition in yields. The flexibility between the two is extremely limited, usually only moving about 2% to 5% within total output.

This means that when market signals direct refineries to maximize jet fuel production, diesel supply is almost inevitably impaired.

Impact: From refineries to gas stations, the chain reaction is spreading

The signal from crack spreads is clear enough: jet fuel crack spreads have soared to $80-$100 per barrel, a record high since the Russia-Ukraine conflict began, sending refineries a clear directive—produce as much jet fuel as possible.

US refineries have responded by raising jet fuel yield by about 2 percentage points and pushing jet fuel exports to record highs to capture extraordinary global profits. But the cost is apparent: gasoline yield has decreased by 2 percentage points, production is down about 340,000 barrels/day from the same period last year. The timing is especially unfavorable—the US driving season begins officially around Memorial Day in late May, and US retail gasoline prices have risen to $4.56/gallon, with the risk of $5 not to be ignored.

In aviation, the impacts are direct as well. IEA warns that several European nations may begin facing jet fuel shortages in the next six weeks, the Middle East previously accounted for 75% of Europe’s net imports of jet fuel. Budget airline EasyJet has stated that rising fuel costs are weighing on customer bookings, with late-year ticket sales down 2% year-on-year versus 2025. ACI Europe, the industry group representing EU airports, warns that summer travel will be disrupted, impacting member countries that rely on tourism with “serious economic shocks.”

JPMorgan concludes that the next stage of the energy shock will no longer be characterized by classic surges in crude oil prices, but rather a refined fuel shortage crisis from the refining end to terminal users—crude oil prices may remain relatively stable around $100, while crack spreads continue to widen, directly impacting consumers, airlines, and logistics through refined fuel prices.

Risk disclosure and disclaimerThe market carries risks and investment requires caution. This article does not constitute personal investment advice and does not take into account individual users’ special investment objectives, financial situation, or needs. Users should consider whether any opinion, viewpoint, or conclusion herein fits their particular circumstances. Investment based on this is at your own risk. ```