Economy 4 min read By Arthur Ellington
US diesel hits record high as California pumps max out at $9.999
Diesel prices in the US have surged past $6 a gallon nationally for the first time, with some California stations hitting the $9.999 display limit. The global supply crunch, driven by Middle East tensions and the effective closure of the Strait of Hormuz, is pushing up costs for trucking, agriculture and consumers.
Diesel prices in the United States have climbed above $6 a gallon nationally for the first time, with some California filling stations pushing their retail displays to the maximum $9.999 per gallon as a global supply crunch intensifies. Fuel-tracking firm GasBuddy confirmed the $9.999 price at pumps in the San Diego suburb of Serra Mesa, and said it was investigating reports at other locations.
California's statewide diesel average reached $7.91 a gallon, well above the national figure. Patrick De Haan, head of petroleum analysis at GasBuddy, cautioned that some pumps may simply be out of fuel, as stations sometimes list $9.999 to deter drivers when diesel has run dry. But he said it is clear that several stations are pricing well above $9 a gallon, and that the first reports of the maximum price gave him «chills» because it is now a realistic option.
De Haan said the national diesel average could rise to $7 a gallon in the coming weeks. «There are really no signs of any improvement,» he said. «There are more signs of escalation. We're headed in the wrong direction.» He added that further clarification is needed on whether stations can legally adjust digital software to charge over $10 a gallon, or switch to charging by the half gallon.
The surge comes as crude oil and fuel prices spike worldwide amid military escalations in the Middle East and the effective closure again of the Strait of Hormuz. The global benchmark for oil jumped almost 8% on September 10, from $101 to $109 a barrel, the highest since May. The average US price for regular unleaded petrol stood at $4.27 a gallon, the highest September level on record.
OPEC reported that Saudi Arabia's oil production fell in August to 6.2 million barrels per day, its lowest since 1990, down from pre-war levels of 10 million barrels daily, as Yemeni Houthi attacks disrupted Red Sea volumes. Houthi attacks have escalated this week, including targeting critical Saudi oil pipelines, while more tankers are being targeted in the Strait of Hormuz.
While oil volumes continue to be drawn down from strategic reserves worldwide — the US Strategic Petroleum Reserve is at 44-year lows — no such reserves exist for refined fuels, especially diesel, which powers trucking fleets and the global economy. The timing is particularly bad for agriculture, which relies heavily on diesel as harvest season begins in September.
«It's going to be trickling down the [inflationary] supply chain in the weeks ahead,» De Haan said. He noted that the highest petrol and diesel prices are cumulatively costing Americans over $700 million more per day versus last year, and he would not be surprised if that rises to a $1 billion daily impact. «Gasoline prices are painful,» he said, «but diesel is really going to be the troublesome child.»
President Donald Trump said this week he is resigned that the Iran war will continue at least into November, though he argued it will be solved shortly after the midterm elections. Susan Bell, senior vice president at Rystad Energy, said that apart from a peaceful truce in the Strait of Hormuz, the only solution is higher prices to force further «demand destruction» of oil and fuels. «I hate to say it, but we need prices at the pump to go up higher to encourage consumers to make choices on their energy consumption. We need more (global) austerity measures,» she said.
Dan Pickering, founder of Pickering Energy Partners, said diesel costs are more concerning than oil spiking above $100 a barrel. «The [global] market is competing for a limited supply of diesel. So, at what point do we worry? We worry now,» he said. «Prices are quite high and there's no easy relief valve. Nobody is building new oil refineries.»
