Cheap Drones Broke the Diesel Market

Cheap drones are reshaping warfare and pushing the main investment payoff from drone makers toward the diesel market.

• European gasoil refining margins reached roughly $94 a barrel over Brent, versus a normal range of $12-$18 and a 2022 crisis peak of about $71, after Ukrainian drone strikes damaged Russian refining capacity.
• First-person-view drones cost around $500 to a few thousand dollars, Shahed-136 drones cost tens of thousands, and the missiles used against them can cost millions; AeroVironment's LOCUST laser contract aims to reduce interception costs to below $5 per engagement.
• Protecting one U.S. military installation would cost about $74 million to install and $5 million annually to operate, implying roughly $7.4 billion for 100 sites; the U.S. fiscal 2027 request raises procurement from $205 billion to $413 billion and R&D from $179 billion to $344 billion.
• The author's seven-stock drone and counter-drone basket fell about 28% over 12 months and 47% from its October 2025 peak, while the Dow Jones U.S. Aerospace and Defense Index gained roughly 10% and the S&P 500 nearly 18%.
• AeroVironment reported a funded backlog of $1.5 billion, up 37%, but revenue grew only 6% and its shares fell about 40%; DroneShield's revenue rose 74% while its shares declined about 46%.

Takeaway: The strategic thesis on cheap autonomous warfare is working, but the market has so far rewarded the resulting fuel scarcity rather than drone equities, making diesel prices the key signal to watch.