Refining Shortage Drives Diesel Prices to Record Highs

The recent rally in crude oil prices has been driven by concerns over supply disruptions and a refining shortage, rather than a production shortfall. Despite US forces striking Iranian vessels over the weekend, Tehran's stated condition for keeping the Strait of Hormuz open is that the country attacking it stops first.

According to data from the Energy Information Administration (EIA), commercial crude oil inventories in the US sit about 1% above their five-year average. However, distillate stocks, which cover diesel and heating fuel, are approximately 14% below their own record levels. Gasoline is also 17% below its record levels.

The New York Harbor diesel crack against the barrel reached a high of roughly $107 on September 1, while retail diesel printed an all-time high of $5.85 a gallon on September 4. This suggests that the refining shortage, rather than a supply issue, is driving up fuel prices.