Europe's defence spending props up shrinking refining sector, says VAROPreem CEO
XLE•Europe's refining sector is benefiting from fuel demand linked to rising defence spending, VAROPreem CEO Dev Sanyal said. EU member states' defence spending reached €418 billion in 2025, up 75% since 2021, while regional refining capacity has fallen from 17.5 million barrels per day in 2009 to 14.4 million last year.
1. Defence fuels demand
Europe's shrinking oil refining sector is benefiting from rising demand for fuel needed to support government defence plans, VAROPreem CEO Dev Sanyal said. EU member states' defence spending rose for an 11th consecutive year in 2025 to €418 billion ($472 billion), a 75% increase since 2021, with further gains forecast for this year.
2. Refining capacity declines
Thirty of around 100 refineries operating in Europe have closed or been converted since 2009, including at least seven converted into biorefineries, according to a FuelsEurope report. Refining capacity in EU countries, Britain, Turkey, Ukraine and Switzerland was 14.4 million barrels per day last year, down from 17.5 million in 2009, the Energy Institute's latest Statistical Review of World Energy showed. Sanyal said military equipment such as F-35 fighter jets and Leopard tanks needs conventional fuel.
3. Diesel prices rise
European diesel futures have reached levels above $14 a metric ton since the Iran war began, last seen after Russia's 2022 invasion of Ukraine. US retail diesel prices hit a record $6.50 per gallon this month, while pressure on Europe to release diesel stockpiles has increased.
