Diesel Prices Soar as Refining Shortage Takes Hold
The US retail diesel price reached a record high of $6.31 on September 16 and matched it again on Friday, up 68 percent from last year's level and from about $3.76 before the war.
This surge in diesel prices is not due to a shortage of crude oil, but rather a refining shortage caused by several factors, including Hormuz taking Middle Eastern product exports off the market, Ukrainian strikes disabling Russia's refineries, and low distillate stocks on the US East Coast.
The difference between the barrel price and the fuel price is known as the crack spread, which has risen above $100, typically ranging from $20 to $40. This indicates a refining shortage rather than a crude oil shortage.
The article also discusses the Federal Reserve's policy rate, which is calculated by subtracting the Fed's inflation projection from the funds rate. According to the provided data, this real policy rate will rise from 0.7 percent in 2023 to 1.6 percent in 2027 and 1.7 percent in 2028.
This increase in real rates is expected to impact gold's price, which is set by real rates rather than the number of interest rate hikes. The article concludes that either inflation falls and real rates rise or inflation stays and nominal rates rise, but neither scenario indicates a 'Fed tolerates inflation' story that would drive up metals prices.