Diesel prices are taking a dive, but don’t get too comfortable. John Kingston breaks down the volatile oil market, highlighting massive price swings and the geopolitical chess game influencing global supply. From the Strait of Hormuz to damaged refining capacity, the factors keeping oil markets on edge are complex. Understand why analysts are divided on the market’s future and what it means for your supply chain.
The Department of Energy’s Energy Information Administration average diesel price — the basis for most fuel surcharges — fell 16.5 cents to $6.127 per gallon, as oil futures markets continued a sharp post-election decline driven by expectations of reduced military escalation in Iran.
The drop is part of a broader pattern of extreme volatility. Of the 36 diesel prices posted since military action in Iran began, 21 have been double-digit moves — up or down — according to John Kingston, who covers energy markets for FreightWaves. Ultra-low sulfur diesel on the CME settled at roughly $4.42 on November 1st, fell to $4.21 the day before the interview, and was down again by double digits on the day of the broadcast.
“The anticipation is that as a result of the election, the Democrats certainly don’t have any taste for ramping things up in Iran,” Kingston said. Markets had priced in a possible post-election ramp-up in military activity — that escalation did not materialize, and traders are now pricing in at least a period of stability, if not formal resolution.
“I just don’t think we’re done here,” Kingston said, warning that lost refining capacity, damaged production infrastructure across the Middle East and Russia, and the continued dependence on U.S. military escorts through the Strait of Hormuz present unresolved structural risks that could push prices back up over time.
Kingston cited two contrasting analytical frameworks from his FreightWaves reporting. Amrita Sen, head of Energy Aspects, argued in a Bloomberg interview that the geopolitical risk premium is now completely out of the market. Francisco Blanch, who leads the energy research team at Bank of America Merrill Lynch, takes a more cautious view rooted in fundamentals — including significant inventory draws that will be hard to replenish, widespread refinery damage in the Middle East and Russia, and the fragility of Strait of Hormuz shipping lanes.
On Hormuz specifically, Kingston noted that crude oil flows appear to be moving, but refined product shipments have not returned to pre-war levels. “Nobody’s completely sure why the refined products have had such a difficult situation getting back to normal,” he said, adding that widespread refinery damage is the most likely explanation.
Kingston had flagged the downside price scenario weeks earlier at FreightWaves’ F3 conference, noting that any move toward stability in the region could send oil prices lower quickly — but that structural supply losses in refining and export capacity could eventually push prices back up after an initial relief rally fades.
- DOE benchmark diesel dropped 16.5 cents to $6.127/gallon, with 21 of 36 prices posted since the Iran conflict beginning showing double-digit moves.
- Ultra-low sulfur diesel futures fell from $4.42 on Nov. 1 to $4.21 the prior session and were down again double digits on the day of the interview.
- Analysts are split: Energy Aspects says the risk premium is gone, while Bank of America Merrill Lynch warns structural supply losses — damaged refineries, strained Hormuz shipping — remain unresolved.
This Summary is generated thanks to a transcription of the interview, for the full interview please enjoy the video above.
