The price of diesel fuel reached a record high on Friday, driven by disruptions in supply due to conflicts in Ukraine and Iran. As a result, truckers in the U.S. are currently paying an average of $5.85 per gallon, which represents a nearly 60% increase from the same period last year when the price was $3.71 per gallon. In California, the price of diesel is notably higher at $7.70 per gallon, nearly $2 more than the national average.
John Kilduff, a partner at Again Capital, indicated that rising diesel prices contribute directly to inflation. "You can do all the virtual shopping you want, it's all going to come to your house on a truck that ran on diesel fuel so there's no way around it," Kilduff stated during an appearance on CNBC's "Morning Call."
Bob McNally, founder of Rapidan Energy, noted that diesel is more embedded in the economy than gasoline prices, as it is utilized in transportation, heating, agriculture, and industrial applications. "It is the important macro fuel to watch," McNally commented.
The increase in diesel prices coincides with ongoing military actions in Ukraine, which have targeted Russian refineries, leading to a ban on diesel exports from Russia. Additionally, refineries in the Middle East are offline due to attacks on tankers in the Strait of Hormuz by Iranian forces.
According to Valero Chief Operating Officer Gary Simmons, the wars have resulted in the shutdown of refineries with a combined capacity of approximately 5 million barrels per day. Brian Mandell, executive vice president for marketing at Phillips 66, remarked on Aug. 5 that "refining fundamentals are very tight and getting tighter with the issues in Russia and the Mideast."
Currently, about 8% of the diesel required to meet global demand of 28 million barrels per day is disrupted, as stated by Andy Lipow, president of Lipow Oil Associates, in an email to CNBC. The diesel export ban from Russia affects approximately 800,000 barrels per day, while disruptions in the Strait of Hormuz impact around 1.2 million barrels per day. Lipow also noted that Iran's Houthi allies have damaged Saudi Arabia's Jizan refinery, which produces about 200,000 barrels per day.
"Diesel is a stealth tax," Lipow said, adding that the increased fuel costs are ultimately passed on to consumers through higher prices for goods and services delivered by truck and rail.
Correction: Brian Mandell is executive vice president for marketing at Phillips 66. An earlier version misspelled the company's name.