Diesel Price Surge Threatens Inflation as Global Fuel Supplies Tighten
Diesel prices are soaring due to geopolitical conflicts and supply disruptions, which could lead to higher costs for U.S. consumers, farmers, and businesses that rely on trucking and transportation.
The increase in diesel prices is a result of the global shortage of refining capacity, rather than a lack of crude oil. Diesel futures have climbed to around $100 above crude oil prices, an unusually wide gap according to Jeff Currie, a former commodities analyst with Goldman Sachs and Carlyle.
Russia's production of refined petroleum products has been disrupted by Ukraine's drone campaign against Russian oil refineries, leading to domestic shortages and export restrictions. Russia is one of the world's largest diesel exporters, making these disruptions particularly consequential.
The closure of the Strait of Hormuz amid the Iran war has also disrupted shipments of refined petroleum products from Gulf producers, adding another constraint to the global fuel system.