Texas, California, and 26 Other States Hit Record High Diesel Prices, As Diesel Passes $6 A Gallon For The First Time Ever
Four simultaneous disruptions to the global fuel supply hit American truckers, farmers, and consumers at once, and experts warn the pain at the pump is nowhere near its peak.
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The U.S. national average price of diesel surpassed $6 a gallon for the first time ever on September 10, according to price tracker GasBuddy, according to Reuters. In California, five stations posted $9.999 a gallon for diesel, the highest figure their pump systems allow.
GasBuddy analyst Patrick De Haan counted 28 states that hit new all-time diesel highs the same day: AK, AL, AR, CA, CO, FL, GA, IA, ID, KS, LA, MD, MN, MO, MS, NC, ND, NE, NM, OK, SC, SD, TN, TX, UT, VA, WA and WY.
Supply Shock, Four Ways
The U.S.-Israeli war on Iran has disrupted shipping through the Strait of Hormuz, a chokepoint that carried roughly one-fifth of global oil supply before the conflict, according to Reuters. Ukrainian drone strikes have taken Russian refineries offline. Moscow imposed a diesel export ban. Beijing tightened fuel export quotas. Four independent taps on the global distillate pool closed at once.
West Texas Intermediate settled at $97.26 a barrel on September 9, up from $84.57 on August 28. Regular gasoline followed, with the U.S. average at $4.16 a gallon for the week ending September 7. Diesel concentrates the geopolitical squeeze because global distillate supply leans heavily on Russian and Middle Eastern flows now interrupted.
Relief Remains Weeks Away
Refiners are running hard, but distillate inventories are lean heading into fall maintenance season, when U.S. refineries traditionally throttle back to switch product slates. Even if the geopolitical picture stabilized tomorrow, the country would need weeks of sustained runs to rebuild stocks.
Alex Ryan, energy director at Kansas-based fuel supplier Oasis Energy, told Reuters diesel prices have more than doubled in a span of five months, saying it has “rocked our cash flows” and that “there has to be a tipping point, I just don’t know when or where it’s going to be.” Farmers and ranchers, hit by rising input costs while crop prices fell, are among the most exposed.
Everything That Moves Costs More
Diesel powers trucks, freight trains, container ships, tractors, combines, and bulldozers. When the fuel doubles, the cost shows up two or three weeks later in produce, packages and construction bids. The University of Michigan consumer sentiment index sat at 55.2 in July, below the 60 mark the university treats as recessionary. Retail sales fell 0.6% in July to $763.6 billion.
Midterm Clock Ticks Loudest
This lands eight weeks before the November midterms. A Reuters/Ipsos poll last month found Democrats held an eight-point advantage over Republicans on which party had the better approach to the cost of living. President Trump acknowledged Wednesday that relief from the oil surge may not come until after the election.
Watch over the next four to six weeks whether U.S. distillate stocks build or draw as refiners enter fall maintenance, and whether shipping insurance rates in the Persian Gulf begin to normalize. Both must move before the pump does.
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AJ has spent the past 10 years writing about financial markets at The Motley Fool. His coverage centers on technology stocks and the broader macroeconomic trends, from interest rates to geopolitics, that shape where markets are headed next. AJ is drawn to the stories where big-picture economics and individual companies collide.
