Diesel fuel prices have reached a record high, driven by the ongoing wars in Ukraine and Iran, which have knocked out key refineries and triggered a global supply crunch [1]. Truckers in the U.S. are now paying an average of $5.85 per gallon nationwide, marking a nearly 60% increase compared to last year's price of $3.71 per gallon. In California, diesel costs have soared to $7.70 per gallon, almost $2 more than the national average [1].
The surge in diesel prices is directly feeding into higher inflation, according to John Kilduff, partner at Again Capital, who emphasized the critical role diesel plays in the delivery of goods and services [1]. Bob McNally, founder of Rapidan Energy, highlighted diesel's deep integration in the economy, noting its use in transportation, heating, agriculture, and industrial sectors, and called it "the important macro fuel to watch" [1].
The disruptions stem from Ukraine's attacks on Russian refineries, which have prompted Moscow to ban diesel exports, and from refineries going offline in the Middle East due to Iran's attacks on tankers and regional energy infrastructure [1]. Valero COO Gary Simmons stated that about 5 million barrels per day of refining capacity have been shut down as a result of these conflicts [1]. Brian Mandell, executive vice president for marketing at Phillips 66, noted that "refining fundamentals are very tight and getting tighter with the issues in Russia and the Mideast" [1].
Andy Lipow, president of Lipow Oil Associates, estimated that about 8% of the diesel needed to supply global demand of 28 million barrels per day is currently disrupted. Russia's diesel export ban affects approximately 800,000 barrels per day, while disruptions in the Strait of Hormuz have impacted about 1.2 million barrels per day. Additionally, Iran's Houthi allies knocked out Saudi Arabia's Jizan refinery, which produces about 200,000 barrels per day [1]. Lipow described diesel as a "stealth tax," with higher fuel costs being passed on to consumers through increased prices for goods and services delivered by truck and rail [1].
CONCLUSION
The record surge in diesel prices, fueled by refinery shutdowns from the Ukraine and Iran conflicts, is significantly impacting inflation and supply chains. With tight refining fundamentals and substantial supply disruptions, market participants and consumers should brace for continued elevated costs and inflationary pressures. Diesel's central role in the economy underscores the far-reaching effects of these geopolitical events.