Diesel Hits Record Even As Oil Prices Fall

Diesel prices hit a record $6.53 a gallon Tuesday even as benchmark crude oil fell to a two-week low.

The national average for diesel stood at $6.52 on Wednesday after dipping by one cent overnight. This is compared with $3.69 a year earlier — several months before the Iran war broke out, according to the American Automobile Association (AAA).

Brent crude, the international oil benchmark, touched $97.36 a barrel Tuesday, its lowest since Sept. 8, and traded above $100 Wednesday morning, Reuters reported.

Tight global supplies of diesel and other distillate fuels, along with elevated crude prices, have driven diesel prices higher in recent months, the Energy Information Administration (EIA) said in a Sept. 18 analysis.

The EIA measures refiners’ margins with the diesel “crack spread,” the difference between the wholesale price of diesel and the spot price of crude oil.

A high crack spread on top of elevated crude prices has driven retail diesel prices up, the agency said.

The agency forecasts that the U.S. average diesel crack spread will stay above $2 a gallon through November before declining steadily through mid-2027, Lee Tucker of EIA media relations told the Daily Caller News Foundation.

The crack spread is an indicator of the relative profitability of producing diesel, not a measure of refiners’ net profits, Tucker added.

The premium European low-sulfur diesel commands over Brent crude hit a record of about $95 a barrel Wednesday after President Donald Trump said he backed the idea of banning U.S. diesel exports, according to Reuters.

Europe has relied on U.S. diesel imports during the war with Iran, the outlet noted.

“The blunt tool of banning diesel exports definitely doesn’t work,” Energy Secretary Chris Wright said Wednesday at an event hosted by The Economist in New York, Reuters reported.

“If you can’t export the diesel that comes out of our refineries, you run out of places to store it, and you have to reduce US refining, which would put upward pressure on gasoline prices and jet fuel prices,” he added.

Wright said the administration was working with refiners to increase diesel supplies in a “simpler, voluntary, cooperative fashion,” but he did not detail the plan and said no decisions had been made, according to the outlet.

The administration is open to any ideas for lowering fuel prices and will make policy announcements in the coming days, he said.

“The Secretary remains fully aligned with the President in exploring all available options to lower energy prices,” the Department of Energy said in a statement to Reuters.

A White House official told Reuters that Trump “wants to see gas prices at the pump fall and is evaluating all the options on the table.”

Interior Secretary Doug Burgum said last week that a ban could prompt retaliation from countries that export fuel to the U.S., which could hurt states such as California, the outlet reported.

“A diesel export ban would backfire. It would mean less U.S. fuel production, tighter fuel supplies, less energy security and higher prices for Americans. There is no upside, which is why administrations from both parties have repeatedly opted against fuel export bans,” Geoff Moody, senior vice president of government relations and policy at the American Fuel & Petrochemical Manufacturers (AFPM), told the DCNF.

“There’s a difference between a shortage of diesel (not enough) and tighter supplies of diesel (more competition for the diesel that exists). We’re experiencing the latter in the United States,” the group told the DCNF.

“Talk of a domestic diesel export ban is threatening to make things even worse,” Jason Hayes, a senior research fellow in the Heritage Foundation’s Center for Energy, Climate and Environment, told the DCNF.

AFPM estimated that damage to refineries in the Middle East and Russia has knocked roughly 10% of global refining capacity offline.

The group also estimated that compliance with the federal Renewable Fuel Standard, which requires refiners and importers to meet annual renewable fuel obligations, has added as much as 40 cents a gallon this year to the cost of supplying gasoline and diesel.

U.S. refineries produced an average of 5.1 million barrels a day of distillate fuel from January through August, the most since 2019, the EIA said in its Sept. 18 analysis.

Distillate inventories, which include diesel and heating oil, fell by 400,000 barrels in the week ending Sept. 18 to 12% below the five-year average, according to preliminary weekly EIA data.

In normal times, crude oil makes up about 42% of the price of diesel, Avery Vise, vice president of trucking at transportation research firm FTR, told the DCNF, citing EIA figures.

Low U.S. distillate inventories and diesel production problems in the Middle East and Russia have created a separate, probably temporary market for diesel, he said.

“That’s why diesel prices are now about 70 cents higher than the record before September, but gasoline prices are still more than 50 cents below the June 2022 record,” Vise added.

Carriers that contract directly with shippers can recover almost all of their higher fuel costs through surcharges, while smaller carriers that book loads through freight brokers have been losing ground, he noted.

A typical over-the-road trucker drives roughly 2,500 miles a week, George O’Connor, director of public affairs at the Owner-Operator Independent Drivers Association (OOIDA), told the DCNF.

“Every dollar increase per gallon in diesel adds around $400 per week in operating cost,” he said.

Shippers will be under pressure to pass those costs along, Vise said.

“The cost of food is surely far more likely to be impacted than, say, the cost of hi-tech goods or other higher-priced items, such as furniture,” he emphasized.