US diesel prices reach record highs as supply squeeze intensifies
The average U.S. Diesel prices rose to new records on Thursday as the global'supply crunch' intensified following renewed hostilities in the United States. Iran, and disruptions due to Ukrainian attacks on Russian refineries - a major source for diesel exports.
According to the fuel price tracking service GasBuddy, the national average price for diesel reached $5.820 per gallon. The previous record of $5.819 per gallon was set on June 17, 2022 in response to Russia's invasion into Ukraine.
Since July 15, the average diesel price has remained over $5 per gallon. Patrick De Haan of GasBuddy's?petroleum analyses, stated on X that 2026 will be the most costly year in U.S. diesel history.
Industry observers warned that prices, which are already high, could rise further due to seasonal demand. In the next few months, diesel consumption is expected to increase as farmers harvest crops in Northern Hemisphere and prepare for planting in Southern Hemisphere. Heating oil demand, which is a similar distillate fuel to diesel, typically increases before the winter heating season.
Diesel is used extensively in agriculture, trucking and industrial activities. Higher diesel prices will have a ripple effect on the economy. Andy Lipow of Lipow Oil Associates said that this can increase transportation costs and production costs, which in turn could raise food prices.
The price of diesel has risen 55% since the U.S. and Israeli war against Iran began on February 28. This rally is being driven by growing concerns about global distillate supply. According to cargo tracking firm Vortexa, 900,000 barrels of diesel per day and 350,000 barrels of jet fuel were transported through the Gulf prior to the war. This is equivalent to 10% and 20% respectively of the global seaborne supply.
The U.S. Diesel Crack Spread, a measure for refining profitability in the United States, rose to a new intraday record of $108.02 per barrel on Wednesday, reflecting the tightness of the market. The crack spread last traded at $101.1 per barrel, down by?4.3% compared to Tuesday. This was after data released on Wednesday indicated a modest rise in distillate stocks last week.
Nevertheless, U.S. Diesel inventories remain historically low. According to Energy Information Administration figures released on Wednesday, distillate stocks (which include heating oil and diesel) averaged the lowest levels of August since 1982.
David Russell, TradeStation's Global Head of Marketing Strategy, said: "We are entering a critical period for diesel consumption with the lowest inventories ever recorded for early September."
He said that farmers and truckers use more diesel during the fall, raising the stakes of the current crisis. This also increases the risk for sharper price hikes.
UBS analyst Giovanni Staunovo stated that U.S. refiners had raised their operating rates to multiyear highs in order to "capture strong margins" and increase diesel production, but supplies are still constrained due to refinery disruptions around the world.
The systematic Ukrainian drone attacks against Russian oil refineries led Moscow to ban diesel exports until September 30.
According to EIA, the 'tightness of diesel supplies' is especially acute on the East Coast. Distillate inventories on the East Coast fell to a new record low, 19.3 million barrels, in the week ending August 28.
This decline is alarming ahead of the winter, as many homes and business in the area rely on heating oils for power generation and space heating.
(source: Reuters)
