US diesel prices cross $6 per gallon for first time
What's the story
The average price of diesel in the United States has crossed $6 a gallon for the first time. According to GasBuddy, which tracks fuel prices in real-time, the national average surpassed this mark on Friday. The American Automobile Association (AAA) also reported an average of $5.98 a gallon on the same day, up 61% from last year's $3.71.
Economic impact
Diesel price surge could have far-reaching economic impacts
The spike in diesel prices is significant as it affects the cost of transporting goods and running businesses.
Diesel is used to fuel trucks, trains, ships, construction equipment, and farm machinery.
Higher costs could be passed on to consumers in the form of increased prices for goods and services.
The conflict involving the US, Israel and Iran has disrupted oil shipments through the Strait of Hormuz, one of the world's major energy routes, carrying about one-fifth of global oil supplies.
Supply constraints
Geopolitical tensions and their impact on fuel prices
The diesel market is further strained by disruptions to Russian refining capacity due to Ukrainian drone attacks on energy infrastructure.
Russia has also imposed restrictions on diesel exports, limiting fuel availability in international markets.
China's fuel export restrictions have added to the supply squeeze. Consequently, diesel prices have risen faster than gasoline prices, which averaged about $4.28 a gallon on September 10, according to AAA data.
Inventory levels
Distillate inventories in the US are near multi-decade lows
Despite US refiners operating at high utilization rates, diesel inventories are still below the five-year average.
According to the US Energy Information Administration, stocks stood at 106.3 million barrels, about 13% below the five-year average.
Distillate inventories are also near multi-decade lows for this time of year.
The US diesel crack spread, a measure of the difference between crude oil prices and refined diesel prices, hit a record $112.17 a barrel on Thursday, according to LSEG data.
Producer impact
Diesel prices contributed to last month's producer price index spike
The US Labor Department noted that diesel prices, which surged 24.1% in August, contributed to over one-third of the increase in goods prices at the producer level last month.
The producer price index measures what businesses receive for goods and services and is often seen as an indicator of cost pressures before reaching consumers.
This makes the diesel surge important beyond just the fuel market itself.