Global Supply Chain Disruptions Fuel Record Gas and Diesel Prices
The global supply chain is experiencing significant disruptions due to the ongoing Iran war and US refining constraints. According to Matt Coday, president of the Oil and Gas Workers Association, six months into the conflict, tanker traffic through the Strait of Hormuz remains far below normal. This has led to a ripple effect on U.S. gasoline and diesel prices.
The national average hovers near $4.15 a gallon, while diesel prices have reached record territory. Coday attributes this to a mismatch between the type of crude many Gulf Coast refineries were built to process and the lighter crude produced in much of the US shale boom. He points out that most refineries were built years ago to process heavier crude than what is now being produced.
The administration has announced a sweeping Venezuelan oil arrangement aimed at securing longer-term supplies of heavy crude for Gulf Coast refineries, which could help lower gasoline and diesel prices over time. Coday believes this deal will allow the US to replace barrels in the Strategic Petroleum Reserve with a mid-grade crude that better fits the reserve's salt caverns.
President Trump has publicly tied future fuel prices to the outcome of the Iran war, predicting that oil prices will drop precipitously when they win. However, Coday cautions that steeply falling oil prices can be a concern for the industry.