California diesel prices climb to $7 per gallon amid global supply disruptions
Diesel in California reached $7 a gallon, driven by refinery outages linked to conflicts in Europe and the Middle East, while national prices rose modestly.
Diesel prices in California rose to $7 per gallon on Wednesday, according to AAA data, marking a $0.30 increase from a month earlier and a 37% jump from the same period last year. The surge follows earlier spikes when geopolitical tensions in Eastern Europe and the Middle East disrupted refinery output and tanker traffic through the Strait of Hormuz.
Nationally, diesel averaged $5.50 a gallon, up about 40 cents from the previous month and $1.81 higher than a year ago. Analysts said the higher cost is likely to be reflected in grocery and other consumer prices. > "That's a pretty significant inflationary concern," said Kevin Book, managing director at ClearView Energy Partners.
Industry experts highlighted diesel's central role in transportation, heating, agriculture and industry. > "It is the important macro fuel to watch," said Bob McNally, president of Rapidan Energy.
Refiners are seeing strong margins, with the spread between crude oil and diesel reaching roughly $100 per barrel, exceeding the current U.S. crude price of about $85. California's higher costs are attributed to its reliance on imported crude, a state-required diesel formulation, and additional environmental and tax levies, according to Andy Lipow of Lipow Oil Associates.
Supply constraints stem from several factors: Ukrainian drone attacks have led Russia to halt diesel exports of about 800,000 barrels per day; disruptions in the Strait of Hormuz affect roughly 1.2 million barrels per day of Middle East diesel exports; and attacks on a Saudi Red Sea refinery have taken 200,000 barrels per day offline. S&P Global estimates that about 6 million barrels per day of global refining capacity are currently idle. > "That's affecting the whole economy," said Dan Yergin, vice chairman of S&P Global.
Analysts expect prices to remain elevated until damaged refineries in Russia resume operations and additional Middle Eastern exports resume, though sanctions may delay repairs.