A shrinking supply of diesel has driven the price to record heights above gasoline and crude oil.
- Gasoline prices have risen around 14% this year—but diesel has gone up 50%. The price is now around $5.35 a gallon.
- The gap between gasoline and diesel last year was 23 cents—now it is $1.61.
- Reserves of diesel are at their lowest since 2008, but the U.S. is still exporting large amounts of fuel to Europe.
- Diesel is an important fuel source for farming, shipping, and transportation equipment.
Why it’s news
Diesel is the fuel most commonly used to power farming equipment and methods of product transportation like semi trucks and trains. It is also used as a heating source in some homes, particularly in New England.
A large part of the fuel shortage can be traced back to the war in Ukraine. Russia is typically a large exporter of diesel. All of the country’s energy exports have been interrupted, but diesel has been affected even more than crude oil.
Russia has also reduced its exports of gas to Europe, causing some European manufacturers to transition from gas to diesel, further driving up demand and costs for the fuel.
However, Russia’s invasion of Ukraine didn’t start the diesel problem—only intensified it. Unlike gas, demand for diesel remained high during the pandemic as more Americans ordered goods to be shipped rather than driving to the store.
Extreme weather, especially in the last year, has affected overall energy prices. The Northern Hemisphere saw freezing winters and searing summers, causing residents to crank up climate control in their homes and businesses.
China also saw severe weather including droughts and heat waves. In response, the country cut down on exports of fuel in order to preserve it for its own people.
Refining capacity around the world decreased during the pandemic. U.S. diesel supply has been on the decline since 2020. More recent refiners’ strikes in France have contributed to the problem as well.
Higher diesel prices for shipping goods are affecting businesses directly, who then pass the costs on to their customers.
Large refinery companies like Valero Energy, Marathon Petroleum, and Exxon Mobil have reported higher profits this year. Shares have increased more than 80%.
While the diesel shortage is expected to eventually regulate, the immediate consequences are approaching quickly. As colder weather heads toward Northeastern homes, energy prices could soar.
Even with the low inventory levels, the U.S. is still producing more diesel than it uses. In large part, the deficit in the U.S. is caused by exports to Europe where the fuel is more valuable. Additional regulations on diesel transportation make it more profitable for refineries to sell overseas.
More diesel is likely to be available soon as refiners in the Gulf Coast increase production and French refiners return to work. China, too, is beginning to export more diesel, but these changes may not come fast enough ahead of winter.