US diesel futures reached $4.8010 per gallon on Wednesday, September 10, following a 23.32 cents or 5.11% increase. This surge places the commodity on a trajectory to break the $5 per gallon mark, a level not consistently seen since 2022 after Russia's invasion of Ukraine. The previous all-time high for daily settlement was $5.1354 in April 2022.
The broader diesel market is experiencing significant price increases. The weekly Department of Energy/Energy Information Administration average retail diesel price rose by 36.8 cents per gallon to $5.967 per gallon, effective Monday. AAA's daily average retail price hit a record $5.85 per gallon on Friday and continued to climb to $5.9424 per gallon by Wednesday. These figures highlight the widespread impact of rising wholesale prices on consumers and businesses.
The current price hikes are attributed to several factors, including geopolitical conflicts and supply chain disruptions. Jeffrey Currie, former head of Goldman Sachs commodities research, pointed to a 3 million barrels per day reduction in refining capacity in the Arab Gulf due due to military action and a reluctance to move fuels out of the region. Analyst Susan Bell from Rystad Energy also noted that global stocks of diesel, gasoline, and jet fuel are at critically low levels, similar to those seen after Russia's initial invasion of Ukraine.
These high diesel prices are expected to have a significant impact on the economy. Diesel, which powers most global transportation and industrial activity, is seen as a key indicator of inflation. Analysts like Dan Pickering, founder of Pickering Energy Partners, emphasized that while crude oil nearing $100 per barrel is concerning, $200 per barrel for diesel is a more serious issue for the global economy. The rising fuel costs are likely to lead to further discussions about interest rate decisions by central banks to manage inflation.
