US diesel prices have climbed above $6 a gallon for the first time, reaching a national average of $6.0556 per gallon, according to the American Automobile Association. In California, prices were nearing $8 a gallon. This surge marks a new record, surpassing the previous high of $5.82 a gallon set in June 2022 following Russia's invasion of Ukraine. The current increase is attributed to refining bottlenecks, geopolitical tensions including the war with Iran and Ukrainian attacks on Russian refineries, and high demand as the peak season for the fuel approaches.
This unprecedented rise in diesel costs, which have increased over 55% since the start of the war with Iran, is expected to lead to higher costs for consumers across various goods and services. Experts like KPMG chief economist Diane Swonk predict that high diesel costs will be an "inflationary problem" for months to come, impacting everything from farming to the shipping of goods. Joseph Brusuelas, chief economist at RSM, highlighted that groceries would be particularly sensitive to these price increases, affecting the entire food supply chain.
The market has been further squeezed by Russia's diesel export ban and restrictions on Chinese fuel exports, tightening global diesel supply. US diesel inventories are 13% below their five-year average at 106.3 million barrels, despite refiners operating at full capacity. The US diesel crack spread, a measure of refining margins, hit a record high of $112.17 a barrel. Analysts expect diesel margins to remain elevated and volatile into early next year due to tight global supplies and upcoming seasonal refinery maintenance.
