Diesel Prices Could Remain High for Years Amid Global Shortage

Kansas State University agricultural economist Gregg Ibendahl says diesel fuel prices could remain high for at least another year, squeezing farmers' profit margins and eventually hitting consumers in the pocketbook.

Ibendahl monitors European natural gas prices as a driver for fertilizer prices and tracks global oil prices to estimate market shifts. He said part of the increase in diesel prices can be traced to higher crude oil prices, which have risen from the mid-$70s to over $100 a barrel, explaining about 70 cents of the increase per gallon.

However, Ibendahl noted that diesel is up more than that amount. The larger driver behind the high diesel prices is a global shortage of diesel fuel caused by geopolitical disruptions and strong overseas demand drawing U.S. supplies offshore.

Russia's reduced shipments after refinery damage from drone attacks during its war with Ukraine has contributed to the shortage, while U.S. refineries are operating at about 98% capacity, 'as hard as they can'. Ibendahl expects diesel prices to remain elevated, possibly in the $6 to $7 per gallon range, for a year or more, barring a rapid easing of global tensions and a resumption of normal fuel flows from major producing regions.