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Diesel Prices Are Surging Again Ahead of Winter

The cost of diesel, the US dollar, and consumers think the future is bleak.

 

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iesel prices are soaring, and Old Man Winter has yet to make his triumphant return. The national average price for a gallon of diesel has climbed all the way back above $5.21, according to the American Automobile Association (AAA). This is up more than 6% from just a week ago. But while the pain at the pump is returning for typical motorists, the spread between gasoline and diesel prices – $1.31 – should be noted since it is a record. Since freezing temperatures and heavy snowfall have yet to blanket the United States, what’s happening, exactly?

What’s the Deal with Diesel Prices?

The first problem is on the supply front. The latest Energy Information Administration (EIA) data show that distillate inventories plunged 4.853 million barrels and distillate fuel output fell 325,000 barrels for the week ending Oct. 7. Domestic stockpiles have fallen for three consecutive weeks, totaling more than 11 million barrels. The latest price movements are concerning with home heating demand (HHD) expected to trend higher in the coming months.

The second contributing factor is the current situation with US refineries. There have been widespread refinery outages on the west coast and in the Midwest. Several refineries are undergoing routine maintenance in other parts of the country. And, in the last week, refiners are reportedly preparing for the possibility that President Joe Biden would institute some type of fuel export ban ahead of the midterm elections in November. The energy industry has opposed the White House’s proposal, arguing that it would slash output and result in higher long-term prices.

Lastly, this is also a fundamental challenge for the sector because of the current administration’s significant dose of regulations on heavy fuel, making it more difficult for refiners to sustain operations and run at maximum capacity.

 

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