Diesel prices in California hit $7 a gallon again Wednesday as wars in Ukraine and the Middle East disrupt global refining. Ukrainian drone strikes on Russian refineries and continued disruption at the Strait of Hormuz have knocked out supply, while refiners book big profits turning crude into diesel.
Diesel in California hit $7 per gallon again Wednesday as wars in Eastern Europe and the Middle East knock out refineries, triggering a fuel supply crunch around the world. Truckers in the state are paying about 30 cents more per gallon than a month ago, according to AAA data. Prices have also surged about 37%, or $1.89 a gallon, compared with the same period last year.
Prices retreated, then climbed again
Diesel in California hit a record $7.75 a gallon in April as Iran choked tanker traffic through the Strait of Hormuz. It then fell below $6.50 in July after exports through Hormuz picked up following a memorandum of understanding between Washington and Tehran. But prices are climbing again just as farmers prepare for the harvest and freight activity picks up ahead of the holiday shopping season.
Nationally, diesel averaged $5.50 a gallon across the U.S. on Wednesday, up about 40 cents over the past month and $1.81 higher than the same period in 2025. According to CNBC: "That's a pretty significant inflationary concern," said Kevin Book, managing director at ClearView Energy Partners. Diesel is used in transportation, heating, agriculture and industrial uses, said Bob McNally, president of Rapidan Energy, who described it as the macro fuel to watch. Rising fuel costs also add to inflation pressure for consumers.
Refiners, meanwhile, are booking large profits. The margin to turn crude oil into diesel has surged to $100 per barrel, higher than the price of U.S. crude, which is trading around $85. California prices run above the rest of the continental U.S. partly because the state relies more on costly crude imports and requires a special diesel formulation, on top of environmental rules and state taxes.
Supply outages stack up
The wars in Ukraine and Iran have disrupted about 8% of the supply needed to meet 28 million barrels per day of global demand, Andy Lipow, president of Lipow Oil Associates, said. Ukrainian drone attacks on Russian refineries have forced Moscow to ban diesel exports of around 800,000 barrels per day, Lipow added.
The Strait of Hormuz disruption has affected about 1.2 million barrels per day of Middle East diesel exports, Lipow said. Houthi attacks on Saudi Arabia's Jizan refinery shut the facility's 200,000 barrels-per-day of capacity at least until the end of August, he said. Refiners in China are also processing less crude and exporting less fuel, Lipow said, and S&P Global estimates about 6 million barrels per day of global refining capacity is offline, Dan Yergin, the firm's vice chairman, said.
Prices are unlikely to ease until damaged refineries return in Russia and more exports flow out of the Middle East, Book said. But sanctions could make it hard for Moscow to source materials to repair its refineries, which extends the outages, he said.
Source: CNBC
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