US diesel prices have surged to a four-month high, a situation exacerbated by ongoing conflicts in the Middle East and Ukraine. These geopolitical events have led to significant disruptions in global diesel supplies. Specifically, attacks involving Iran and refinery outages in Russia have tightened the market considerably, with the vital Strait of Hormuz experiencing shipment interruptions and Ukrainian drone strikes impacting Russian refineries. As a result, global diesel benchmark ICE gasoil futures climbed as much as 4.2%, reaching their highest point since April 9. Diesel prices have jumped more than 50% since June 18, outpacing oil price gains.
Refiner profit margins for producing diesel, known as the diesel crack spread, have soared to a record $106 a barrel as of September 1. This figure is a substantial increase from the typical $20 to $30 a barrel when oil is priced around $70. Goldman Sachs analysts have more than doubled their forecasts for diesel refining profits due to these disruptions. The average retail price of diesel in the US reached $5.63 a gallon, according to AAA, with other sources citing $5.652/g, marking its highest since the war in Iran began. This sharp increase poses significant inflationary concerns, especially as the heating season approaches and agricultural activity picks up.
Domestic diesel supplies in the US have fallen to the lowest seasonal levels on record, even as US refineries operate at about 97% capacity and exports of diesel have increased by approximately 28% compared to last year. This imbalance is primarily due to the severe constraints on global supply, with Middle Eastern crude oil refining dropping by 1.6 million barrels a day from 2025 levels and Russian refining capacity being significantly impacted by drone strikes. The elevated prices are benefiting refineries, with firms like Valero Energy and Marathon Petroleum reporting roughly doubled profit margins, but are creating financial strain for consumers, farmers, and trucking companies, threatening higher heating bills and increased operational costs.
