Retail diesel has never been this expensive

Price data shows that the AAA price on the Friday before attacks against Iran began, followed by Iranian counterattacks, stood at $3.758/g, with the latest price now up about $2.10 since that day.

The last four days have seen a remarkable surge in retail diesel prices as measured by AAA, adding just under 25 cts/g during that time.

The DTS.USA data stream in SONAR for Friday showed a slightly lower average at $5.81/g. 

That followed a sharp rise in prices on the ultra low sulfur diesel contract on CME, which is the starting point for the multi-step process that ultimately leads to a price at the pump.

ULSD settled at just under $4.50/g on August 21. It then plunged to about $4.25/g the next four days on hopes for more relief from restricted flow in the Strait of Hormuz, though that would not have had any impact from the curtailment of diesel supplies out of Russia. 

That latter development has been as a result of successful drone strikes by Ukraine on the Russian refining sector, which is heavily oriented toward the production of middle distillates such as diesel.

But hope is not fundamentals, and ULSD took off from there, climbing to a settlement Wednesday of $4.6822/g. That recent upward move also comes after the entire month was essentially a bull run; a month ago, on August 4, ULSD settled at $3.7705/g.

Tossing out what appears to be a one-day outlier settlement from 2022, the all-time high ULSD settlement was Tuesday of this week at $4.6773/g.

Ironically, as the media reports are filled with the news of the all-time diesel high, its price on CME has softened. It declined 8.86 cts/g Thursday. Friday at approximately 10:30 a.m., ULSD was down just under 12 cts/g to $4.4739/g.   

Kevin Book, the managing director of ClearView Energy Partners, summed up the market situation for diesel in an interview Friday on CNBC. 

He described middle distillates such as diesel as “at the top of the list as far as the energy policy discussion right now.”

He noted that U.S. refineries are running “flat out”–not surprising, given that crack spreads for all products but diesel in particular are at historic highs–but that some Middle East supplies have been blocked by the closure of the Strait of Hormuz “and are compounded by outages in Russia.”

Book expressed skepticism about a quick slide in prices should the Strait open fully. “I think that there are real questions about the infrastructure on the other side,” he said.

While there have been refinery restarts, and if the Strait gets back to normal, “it looks a little bit better.”

“But will it go back to flowing as it did?” Book said. “It doesn’t seem obviously that way right now.”

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