As the autumn demand season nears, heightened supply worries are intensifying, and the renewed escalation of conflict in the Middle East is putting greater pressure on diesel prices. Joe DeLaura, a senior energy strategist at Rabobank, stated, "We are currently facing a tight diesel supply situation because refineries in the Persian Gulf region are unable to ship out their products." Factors such as Ukraine's attacks on Russian refineries have worsened the global shortage, driving prices higher and impacting the economy and inflation.
DeLaura noted, "Crude oil is just the raw material, but diesel is the foundation upon which the entire industrial economy operates. Agriculture, construction, mining, and the sectors of supply and distribution all rely on diesel." Even during ceasefires between the U.S. and Iran, when crude oil prices fell, diesel prices remained elevated, which could further push up transportation costs in the autumn.
Hannah Hurckes, CEO of freight brokerage and third-party logistics fulfillment provider Boss Lady Logistics, remarked, "Autumn is particularly tough; it's currently a bit of a perfect storm. When the harvest season, early heating demand, and war occur simultaneously, a tight diesel supply will directly impact the entire economy."
Matt Muenster, chief economist at transportation technology firm Breakthrough, pointed out that while crude oil prices are usually the main driver of diesel prices, this time, refining margins are the dominant force behind the price increases. He said, "When both crude oil prices and refining margins expand at the same time, the cost pressure on diesel is doubled." The transportation sector faces the greatest challenges.
This Monday, the average price of on-highway diesel was $5.31 per gallon, compared to $3.53 a year ago. Muenster stated that even with fuel surcharges in contracts, trucking companies are struggling to cope with price volatility, as it affects their ability to forecast and budget energy costs. "Price shocks create major problems because there is a huge lag in energy compensation."
Hurckes of Boss Lady Logistics said that for small trucking operators, "aside from parking their rigs for the day and waiting for diesel prices to drop, there is virtually no other contingency plan. This puts carriers in an almost impossible situation and pushes up spot rates in the market."
John Kilduff, partner at investment advisory firm Again Capital, said that under a tight diesel supply, refining margins may remain high even if oil prices fall. He noted, "When people consistently see crude oil prices drop but diesel prices at the pump do not fall as much, there will be a great deal of dissatisfaction."
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