Diesel Hits $4.72: Why This Price Shock Won’t Fade Soon
Heating oil spot price at New York Harbor reaches five-year high.
Diesel prices have surged to levels not seen in five years, with heating oil spot prices at New York Harbor reaching $4.72 per gallon, a threshold last breached in five years. The spike, driven by refinery outages, geopolitical disruptions, and seasonal demand, is not just another blip.
The latest surge in diesel prices is underpinned by structural factors that differentiate it from previous spikes. Unlike those episodes, however, this rally is backed by tangible supply constraints that show no immediate signs of easing.
Refinery Outages and Geopolitical Disruptions Fuel the Rally
The core of the supply crunch lies in the combined impact of Ukrainian drone strikes on Russian refineries and ongoing disruptions at the Strait of Hormuz. John Kingston, editor-at-large at FreightWaves, highlighted that the attacks on Russian facilities have taken over 1 million barrels per day of refining capacity offline. “The Ukrainian attacks on Russian refineries have taken over 1 million barrels a day of refining capacity offline,” Kingston said, noting that Russian refineries were specifically geared toward diesel production due to the country’s heavier crude slate.
Brent Crude
Meanwhile, tanker tracking firms like Kepler have publicly challenged optimistic U.S. government estimates of oil flows through the Strait of Hormuz. Questions linger about how many vessels can safely reload, further tightening middle-distillate supplies.
The heating oil spot price at New York Harbor, the benchmark for middle-distillate contracts, hit $4.72 per gallon, the highest level in five years. The only settlement price above this threshold occurred on a single anomalous day in April, when the expiring May contract spiked above $5 per gallon before collapsing by $1 the following session, a classic short-covering event with no real-world supply implications.
Economic Ripple Effects: Why Diesel Matters More Than Gasoline
The broader economic consequences of a sustained diesel price shock far outweigh those of a gasoline spike. Jeffrey Currie, former head of commodities at Goldman Sachs, framed the issue succinctly: “All commodities are dirt with diesel, meaning they’re produced from the earth one way or the other. Either you plant them and they grow, or you dig them out like ore, and you need diesel to do all of that.”
“This higher market has legs. You can imagine it running for months because you’re still not at normal supplies, and on top of that, down the road, you’re going to have to rebuild inventories.”
John Kingston·FreightWaves editor-at-large
Kingston’s analysis suggests that even if diesel’s absolute price does not break prior records, the cumulative cost to the economy, total daily consumption multiplied by price over a six-month period starting March 1, could exceed the toll from the 2008 and 2022 spikes combined. For industries reliant on diesel, from trucking to agriculture, the implications are stark.
Truckload carriers, for instance, can pass most fuel costs to shippers via fuel surcharges. However, empty and backhaul miles, often accounting for 12% to 13% of total miles for truckload fleets, carry no surcharge recovery. The East Coast and Northeast are particularly vulnerable, as EIA weekly inventory data released Tuesday showed regional diesel stocks at levels Kingston described as “almost unimaginable” to market participants even a short time ago.
California diesel has breached $7 per gallon on the DOE regional price, driven by state taxes and clean-fuel mandates like the Low Carbon Fuel Standard. Meanwhile, the Lower Atlantic region sits around $5.43 per gallon, still elevated but less extreme. These variations underscore the uneven impact of the diesel shock across different markets.
The crack spread, which measures the difference between the price of crude oil and refined products like diesel, has hit eliminar referencia a 100% in some markets. This indicates that refiners are struggling to keep pace with demand, further tightening supply and sustaining high prices.
The implications extend beyond the trucking and shipping sectors. Agriculture, manufacturing, and construction, all heavily reliant on diesel, face higher operational costs that could trickle down to consumer prices. The sustained nature of this price shock suggests that businesses and policymakers may need to brace for prolonged economic pressure, particularly in regions already grappling with high fuel costs.
For now, the market shows no signs of relief. With refinery outages persisting, geopolitical tensions unresolved, and seasonal heating oil demand on the horizon, diesel prices are poised to remain elevated. The question is not whether the surge will last, but how deeply it will reshape global supply chains and economic activity in the months ahead.
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