Key facts
- U.S. diesel prices hit a record $5.85 a gallon on September 4, surpassing the previous high from June 2022.
- The national average for diesel has been above $5 a gallon since July 15.
- Brent crude was trading above $95 a barrel on Friday, up from roughly $70 before the Russia-Ukraine war.
- Combined disruptions to global diesel supplies are equivalent to around 20% of global seaborne diesel trade.
- U.S. distillate stocks, including diesel and heating oil, averaged their lowest August levels since 1982.
- The U.S. diesel crack spread, a measure of refinery margins, hit a record intraday high of $108.02 a barrel on Wednesday.
Oil prices were on track for a weekly gain of over 7% as supply disruptions, particularly from attacks on shipping routes in the Middle East and Ukrainian strikes on Russian refineries, intensified. U.S. diesel prices reached a record high of $5.85 a gallon on September 4, according to the American Automobile Association (AAA), surpassing the previous record set in June 2022. This surge in diesel prices, which powers critical sectors like trucking and farming, is expected to increase transportation costs for various goods and potentially contribute to inflation.
Brent crude, the international benchmark, was trading above $95 a barrel on Friday, reflecting a broader upward trend in oil prices driven by escalating conflicts. The national average for diesel has consistently remained above $5 a gallon since July 15, with projections indicating 2026 could be the most expensive year for diesel in U.S. history. The tight supply situation is exacerbated by a significant drop in tanker traffic through the Strait of Hormuz, with only four commodity vessels transiting the waterway on Thursday compared to a 10-day average of about 15. Ukrainian drone attacks on Russian oil refineries have further strained global diesel supplies, with combined disruptions estimated to account for approximately 20% of global seaborne diesel trade, according to ING analysts.
Refining markets are also showing strain, with the U.S. diesel crack spread reaching a record intraday high of $108.02 a barrel on Wednesday. Despite a modest increase in distillate inventories reported by the Energy Information Administration, supplies remain historically low. U.S. distillate stocks averaged their lowest August levels since 1982. Analysts warn that entering a key period for diesel consumption with record-low inventories necessitates a recovery in Persian Gulf and/or Russian flows for meaningful relief.