The US national average for diesel prices crossed $5 per gallon on Tuesday to reach $5.044, marking a new level of stress for the US fuel market spurred by the war in Iran.
The price is up from $3.651 per gallon a month ago, according to AAA data.
Diesel is one of the mainstays of the US economy, fueling the trucks, trains, ships, and other transport that move goods across the country. Spikes in diesel prices or supply tend to ripple quickly through freight costs, agriculture, and ultimately consumer inflation.
While the war has put immense stress on crude oil prices (BZ=F), its impact may run even deeper in these areas, Goldman Sachs commodities strategists wrote in a note to clients published late Monday.
A mix of shutdowns at refineries in the Middle East, driven by both direct damage and precautionary measures, has taken roughly 2.2 million barrels per day of global refining capacity offline, strategists Yulia Zhestkova Grigsby and Daan Struyven said.
At the same time, the effective closure of the Strait of Hormuz has steeply cut into the roughly 3.3 million barrels per day of refined products that are typically exported through the key waterway. That’s along with the 12.8 million bpd of crude oil that exits the Strait to arrive at Asian refineries.
Higher tanker freight rates and natural gas prices (NG=F), along with a bevy of recently implemented global trade policies and tariffs, could also put upward pressure on refined products pricing.
“Prices have rallied much more for many refined products than for crude,” the strategists wrote. “While we see the largest direct effects from the hit to Persian Gulf refined products exports for European jet fuel and Asian naphtha, severe disruptions in medium-heavy crude supplies pose large downside risks to global production of diesel, jet fuel, and fuel oil.”