An interesting dynamic is playing out in fuel markets, especially as inflation remains on the radar. While gasoline price have come down from the records notched in June, diesel prices have remained uncomfortably high, contributing to additional price pressures and shipping costs. In fact, on a year-over-year basis, gas prices are up 11% and diesel has soared 47% , to $3.80 and $5.36, respectively.
Quote: "The economic impact is insidious because everything moves across the country powered by diesel," said Tom Kloza, co-founder of the Oil Price Information Service. "It's an inflation accelerant, and the consumer ultimately has to pay for it."
Not only does diesel power trucks and trains, but also tractors and construction equipment. That translates into profound inputs for the economy and affects the cost of nearly every product. Many of those fees are now getting tacked on as fuel surcharges, while some in the industry are even worrying about potential inventory shortages.
Demand for diesel: American refineries tend to do maintenance at this time of year, but it's coinciding with an industry that is at max capacity. Some refineries have never come back online after COVID-19 and some analysts even link the shortages to closures that took place before the pandemic (or the lack of investment). Some factors are also seasonal, like increased demand during the agricultural planting and harvesting seasons, while a ban on Russian imports - and the U.S. exporting lucrative diesel products abroad - aren't helping the situation.
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Diesel fuel inflation diverges from gasoline price path