Defense Spending Props Up Europe's Shrinking Oil Refining Sector
Dev Sanyal says rising European military spending is sustaining a declining oil refining sector as demand for military-grade fuels increases.
Rising government defense spending is providing a critical lifeline to Europe's shrinking oil refining sector, according to Dev Sanyal, CEO of VAROPreem. European Union member states' defense spending reached 418 billion euros in 2025, representing a 75 percent increase since 2021. This surge is driving demand for specialized fuels required for military hardware, such as Leopard tanks and F-35 fighter jets.
This trend follows a long-term decline in regional refining capacity. Between 2015 and 2022, the industry focused on refinery closures, with approximately 30 of 100 European refineries closed or converted since 2009. Total refining capacity across the EU, Britain, Turkey, Ukraine, and Switzerland dropped to 14.4 million barrels per day last year, down from 17.5 million in 2009.
Market pressures have intensified due to the Iran war and attacks on Russian refining infrastructure. These events contributed to a surge in diesel prices, with U.S. retail diesel hitting a record 6.50 dollars per gallon. In response to these shortages, the United States has pressured Europe to release its diesel stockpiles.
