Gas and diesel fuel prices will exceed $ 6.00 per gallon and will appear at gas stations in Los Angeles on March 2, 2022.
Frederick J. Brown | AFP | Getty Images
Diesel prices are skyrocketing, contributing to the headwinds of inflation due to the important role of fuels in the US and global economies. Tankers, trains, trucks and planes are all diesel-powered. Fuel is also used in industries such as agriculture, manufacturing, metals and mining.
Patrick de Khan, Head of Oil Analysis at Gas Buddy, said: Higher prices “will certainly translate into more expensive commodities,” he said, as these higher fuel costs are passed on to consumers. “Especially grocery stores, hardware stores, wherever you shop.”
In other words, the impact will be felt throughout the economy.
Soaring prices occur shortly after rising demand as economies around the world return to business. This has pushed inventories to historically low levels. Products such as diesel, kerosene, and jet fuel are known as “intermediate fractions” because they are made from the middle of the boiling range when the oil turns into a product.
US distillate inventories are currently at their lowest levels in more than a decade. According to UBS, New York Harbor diesel and jet fuels are currently trading well over $ 200 per barrel.
Europe’s move from Russia’s reliance on energy is accelerating rapid price increases. According to Stephen Brennock, a brokerage firm, the block currently imports about 700,000 barrels of diesel per day from Russia.
“”[T]The EU’s proposal to ban Russia’s oil imports will exacerbate the tight global supply. ” There is a shortage of diesel. “
Energy consultancy Ristad reiterated this point, saying that the loss of Russian refined products would make the diesel shortage in Europe “more serious.”
Refiners cannot increase production to meet the surge in demand, and utilization is already over 90%. In the United States, refining capacity has declined in recent years. Philadelphia Energy Solutions, the largest refining facility on the East Coast, was closed due to a fire in June 2019.
Currently, several refiners are being reconfigured to produce biofuels, which are also reducing capacity.
Some refiners also undergo regular maintenance checks that have been postponed after the pandemic. These facilities are typically in full operation 24 hours a day, 7 days a week, so you may need to check your machines at some point.
According to Dehan, the East Coast relies heavily on sophisticated products elsewhere in the country. Now Europe is competing for these same fuels as it moves away from Russia.
A common saying in the commodity market is that “high-priced treatments are high-priced.” But this time it may not be. According to UBS, demand for distillates tends to be less elastic than gasoline prices.
In other words, the high prices of pumps may discourage consumers, but if a company needs to get goods from point A to point B, they will pay those high prices.
Tom Kloza, Head of Global Energy Research at OPIS, said that over the past few years, diesel barrels have typically been sold at a price that is $ 10 higher than the price of crude oil. Today, the difference (known as the spread of the crack) has skyrocketed to a record high of over $ 70.
“It’s not tied up, it’s not upset, it’s a little free. These are the prices we’re unfamiliar with,” he said, adding that there is a huge price gap across the United States. Added.
Diesel at New York Harbor currently trades at around $ 5 per gallon, according to Croza, but jet fuel prices at ports that typically reflect diesel prices are around $ 6.72. That’s about $ 282 per barrel.
“These numbers aren’t just off the charts. They’re off the walls, off the buildings, and probably off the solar system,” he said.
Diesel retail prices are also skyrocketing. The national average for gallons on Friday hit a record of $ 5.51. AAAAfter hitting new highs every day last week.
Rising diesel prices will lead to higher profit margins for refiners. Refiners are motivated to do as much as possible. At some point, this could lead to tighter petrol markets, pushing up the high prices consumers are already seeing in pumps.
In the meantime, consumers can expect the price of goods to continue to rise.
“As these diesel prices fall to the cost of commodities, they will have a double impact on consumers in the coming weeks and months. Another inflation that will hurt consumers,” said De Khan of Gas Buddy. That’s it. ” The recent price hike has not yet been felt.
Diesel fuel supply is scarce due to soaring prices — this is what inflation means
Source link Diesel fuel supply is scarce due to soaring prices — this is what inflation means