The U.S. national average diesel price climbed to a record $5.820 a gallon on Thursday, topping the prior high set in June 2022. Renewed U.S.-Iran hostilities and Ukrainian strikes on Russian refineries have tightened global distillate supply, and inventories on the East Coast have dropped to their lowest level on record.
The national average price of diesel hit $5.820 a gallon, according to fuel price tracker GasBuddy. That beat the previous high of $5.819 a gallon set in June 2022 after Russia's invasion of Ukraine. Prices have stayed above $5 a gallon since July 15, and GasBuddy's Patrick De Haan said 2026 is on track to be the most expensive year for diesel in U.S. history.
Conflicts squeeze global supply
Renewed hostilities between the U.S. and Iran, combined with Ukrainian attacks on Russian refineries, have intensified the global supply crunch. Diesel prices are up 55% since the U.S.-Israeli war on Iran started on February 28. Before the war, roughly 900,000 barrels a day of diesel and 350,000 barrels a day of jet fuel moved through the Gulf, equal to about 10% and 20% of global seaborne supply, according to cargo-tracking firm Vortexa.
Systemic Ukrainian drone strikes on Russian refineries also pushed Moscow to ban diesel exports through September 30. U.S. refiners have raised operating rates to multi-year highs to capture strong margins and lift diesel output, but global refinery disruptions still constrain supply, UBS analyst Giovanni Staunovo said. The diesel crack spread, a measure of the profit refiners earn turning crude oil into diesel, surged to a record intraday high of $108.02 a barrel on Wednesday. It then eased to $101.1 a barrel, down 4.3% from Tuesday, after government data showed a modest rise in distillate inventories.
Inventories at multi-decade lows
Even so, U.S. diesel inventories remain historically low. Distillate stocks, which include diesel and heating oil, averaged their lowest August levels for this time of year since 1982, according to Energy Information Administration data. The squeeze is sharpest on the East Coast, where distillate inventories fell to a record low of 19.3 million barrels in the week ended August 28, in data going back to 1990.
David Russell, global head of market strategy at TradeStation, said "we're entering a key period for diesel consumption" with the lowest inventories on record for early September. Farmers and truckers typically use more diesel in autumn, he added, raising the stakes for the current crisis.
Ripple effects ahead of winter
Higher diesel prices can ripple through the economy because the fuel is widely used in trucking, agriculture and industrial activity, raising transportation and production costs that can ultimately lift food prices, said Andy Lipow, president of Lipow Oil Associates. Farmers harvesting crops in the Northern Hemisphere, along with planting preparations in the Southern Hemisphere, are expected to boost diesel demand in the coming months, and heating oil demand typically rises ahead of winter.
The East Coast's low distillate stocks are especially concerning heading into the cold season, since many homes and businesses in the region rely on heating oil for space heating and power generation.
Source: Investing.com (Reuters)
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