Diesel Prices Stuck Above $5 Due to Refining Capacity Crunch
Diesel prices have been stuck above $5 for an extended period, and experts attribute this to refining capacity issues rather than crude oil supply. According to Aaron Decker, CEO of Multi-Service Fuel Card, it's not a crisis related to crude but rather a refining one.
Decker points out that crack spreads have surged beyond their typical range of $15-$25 per barrel and are now above $100. He also notes that ultra-low distillate inventories have fallen to levels last seen in the early 2000s or late 1990s, indicating a 'really troubling' situation.
The refining capacity crunch is exacerbated by several factors, including Ukrainian drone strikes on Russian refineries and elevated U.S. Gulf Coast exports. Decker emphasizes that a key indicator of market trends is a weekly government report tracking Hormuz tanker traffic, Russian refinery runs, and U.S. distillate inventories.
Decker predicts that diesel prices will remain above $5 for the foreseeable future, as indicated by the Energy Information Administration's (EIA) adjusted forecast from earlier this year.