Refinery Windfall: Energy ETFs to Gain Amid Soaring Diesel Prices

A recent analysis from the U.S. Energy Information Administration (EIA), published on Dec. 3, 2025, highlights how geopolitical tensions have significantly pushed up diesel prices and thereby global refinery margins. As of Nov. 12, 2025, benchmark diesel price rose to its highest level over a period of 16 months, according to FreightWaves, as cited in Yahoo Finance. 

This dynamic is poised to directly boost the profitability of major oil stocks like ExxonMobil XOM, Chevron CVX, Phillips 66 PSX and Marathon Petroleum MPC, which have large refining operations for diesel. 

With industry giants and other refiners’ margins getting a boost, this momentum is expected to translate into solid profitability for energy-focused exchange-traded funds (ETFs), making them increasingly attractive to investors seeking to capitalize on the current market dynamics.

What's Driving Diesel Prices Higher?

According to the EIA report, crack spreads for diesel at key hubs such as New York Harbor, the U.S. Gulf Coast and the Amsterdam–Rotterdam–Antwerp (ARA) region surged above 1 dollar per gallon from mid-October to mid-November, 2025. 

The surge in diesel cracks spreads—the profit margin from refining crude into diesel—has been the result of a combination of factors mentioned below: 

Sanctions and Trade Restrictions: European Union sanctions introduced in mid-2025 targeted Russian crude oil and refined products more aggressively. These measures aimed to limit the flow of Russian diesel into global markets, forcing buyers to seek alternative, often higher-priced, supplies.

Refinery Outages: Physical disruptions have compounded the shortage. Key refineries in Russia and the Middle East, including Kuwait's major Al Zour refinery, experienced significant outages in late October. This caused a substantial shortage in global diesel production capacity at a critical time.

Military Strikes: Ukraine’s attacks on Russian petroleum export infrastructure further hampered the country's ability to produce and ship diesel, tightening global supply even more.

These factors created a "perfect storm" in the Atlantic Basin, driving diesel crack spreads in hubs like New York Harbor to their highest levels of the year.

From Refinery Profits to ETF Performance

For the oil refinery companies mentioned at the beginning of this article, the benefit from this high-priced diesel is straightforward. They buy crude oil, which has seen relatively stable or lower prices, and sell refined products like diesel at suddenly much higher prices. This crack spread contributes directly to their profitability and eventually to their bottom line. This was evident in the third quarter of 2025, when major oil companies reported that rising refining profits helped offset weaker earnings from their drilling operations. Evidently, global refining margins hit multi-year highs this November, according to LSEG data and analysts, as cited on Reuters.

For diversified energy ETFs, which hold a significant proportion of these refining companies, this increased profitability provides a strong tailwind. These ETFs offer investors a convenient way to gain exposure to the refining sector's improved outlook without the need to select individual stocks. The enhanced financial health of these constituent companies may lead to an appreciation in the ETFs’ net asset value, drawing in more investment.

This favorable environment sets the stage for a closer look at specific energy ETFs that are poised to benefit from the recent strength observed in diesel prices.

State Street Energy Select Sector SPDR ETF XLE

This fund, with assets under management (AUM) worth $27.81 billion, offers exposure to 22 companies from the oil, gas and consumable fuel, energy equipment and services industries. Its top 10 holdings include XOM (23.21%), CVX (17.22%), MPC (3.94%) and PSX (3.87%).  

XLE has gained 10.3% year to date. The fund charges 8 basis points (bps) as fees. It traded at a good volume of 11.9 million in the last trading session. 

iShares U.S. Energy ETF IYE

This fund, with net assets worth $1.16 billion, offers exposure to 39 U.S. companies that produce and distribute oil and gas.  Its top 10 holdings include XOM (22.76%), CVX (14.90%), MPC (3.44%) and PSX (3.35%).  

IYE has gained 9.9% year to date. The fund charges 38 bps as fees. It had a volume of 0.7 million in the last trading session. 

Vanguard Energy ETF VDE

This fund, with net assets worth $7.1 billion, offers exposure to 110 energy stocks.  Its top 10 holdings include XOM (23.01%), CVX (15.79%), MPC (3.24%) and PSX (2.91%).  

VDE has gained 10% year to date. The fund charges 9 bps as fees. It traded at a volume of 0.3 million in the last trading session. 

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This article originally published on Zacks Investment Research (zacks.com).

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