Diesel prices have climbed to a level not seen since August, marking a significant increase in the cost of fuel used for transportation. According to the Department of Energy’s Energy Information Administration (DOE/EIA), the national average weekly retail price for diesel surged by 11.3 cents a gallon, reaching $3.715. This marks the highest price since Aug. 5, when the cost was $3.755 per gallon.
The increase is the largest one-week jump since February 12, when the price spiked by 21 cents, partly due to shipping disruptions in the Red Sea. With this recent rise, the DOE/EIA price has now increased by 25.7 cents per gallon since its low of $3.458 recorded on Dec. 9.
This surge in diesel prices comes amid a backdrop of rising oil prices, particularly the cost of ultra-low sulfur diesel (ULSD) on the CME commodity exchange. Although oil prices saw a decline on Friday and Tuesday, the initial spike was largely driven by reactions to sanctions imposed on Russian oil shipments under former President Joe Biden’s administration in the final days of his term.
On January 8, ULSD on the CME settled at $2.3507 per gallon. By January 15, the price had risen to $2.6172, before slipping to $2.5581 by Tuesday, marking a daily drop of 6.29 cents.
Energy economist Philip Verleger, in his weekly newsletter, discussed the implications of these sanctions, stating, “Our view is that the sanctions lay the groundwork for much higher oil prices, especially since incoming Treasury Secretary Scott Bessent endorsed them at his confirmation hearings.”
A recent article painted a more concerning picture, suggesting that the latest sanctions on Russian oil tankers could severely disrupt Russia’s export capabilities. “Some of Moscow’s flows are at risk of a near wipeout if history is any guide,” the article warned.
The International Energy Agency (IEA) addressed the potential impact of the sanctions in its monthly report, which highlighted the targeted sanctions on major Russian producers such as Gazprom and Surgutneftegaz, over 160 tankers, and several insurance companies involved in Russian oil transport. The Biden administration has also extended sanctions on Iranian exports, further complicating global oil supply chains.
While the IEA refrained from adjusting its forecast for Russian and Iranian oil supplies, it noted that the full effects of the sanctions are yet to be seen. “Some operators have reportedly already started to pull back from Iranian and Russian oil,” the IEA stated.
Jeremy Irwin, a senior oil markets analyst at Energy Aspects, told last week that his consultancy estimates 500,000 to 1 million barrels per day of Russian crude will be disrupted. Other market estimates suggest the disruption could be more severe, with Irwin describing the situation as “an evolving one.”
Irwin added, “We definitely see China and India as the most affected parties. We’re seeing that in the market, with both countries aggressively sourcing alternative barrels.”
As the sanctions continue to impact global oil trade, the full effect on diesel prices and broader energy markets remains uncertain, but it is clear that these disruptions are contributing to the rising cost of fuel across the United States.
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