Diesel Price Surge: Refining Shortage Trumps Crude Oil Prices
The price of US retail diesel has set a record at $6.31 per gallon, up 68% from last year and 52% from before the war in Ukraine. This increase is attributed to a refining shortage rather than a crude oil shortage.
Crude prices are also up by 52%, but the crack spread, which measures the refiner's margin between the barrel and fuel, has surged above $100 against its usual range of $20-$40. This indicates that refineries are struggling to meet demand for diesel, a critical component in transportation.
The White House acknowledged that the price rise is largely due to the Russia-Ukraine conflict, which has disrupted global supply chains. The refining shortage is particularly acute on the US East Coast, where distillate stocks have reached an all-time low ahead of the heating season.
While crude oil futures prices have retreated in recent days, diesel prices remain stubbornly high due to the ongoing supply constraints. This divergence between crude and diesel prices has significant implications for inflation data, the Federal Reserve's rate hike projections, and gold prices.