By Lauren Fix, The Car Coach
Everyone is worried about gas prices, but diesel is driving inflation more than you think.
The price of diesel affects everyone whether you own a car or not. Even before Russia invaded Ukraine, diesel fuel was in short supply due to a drop in global refining capacity. Now some analysts say there could be spot shortages of diesel fuel and prices may stay elevated, even if oil and gasoline decline. Those higher diesel fuel prices are also stoking inflation.
Gas and diesel fuel prices have reached record prices in the last few weeks. In recent weeks, the trucking industry has noted a worrisome decline in diesel inventories in the Northeast (below 20M barrels), as well as on-the-ground reports of supply issues, resulting from a lack of supply.
Diesel prices hit a record average high of $5.58 per gallon last Wednesday, according to AAA. This marks a 75 percent increase from a year ago.
Diesel is essential for the US economy, powering farms and the construction sector along with the trucks, trains, and boats that help move goods. Rising diesel prices will drive up inflation, which has hit 40-year highs. The impact literally affects everyone even if you don’t own a car.
Why are High Diesel Prices Increasing the Cost of Everything?
The White House is considering tapping the Northeast Home Heating Oil Reserve, created in 2000 to help with supply issues and used only once in 2012 in the wake of Hurricane Sandy. The impact of such a release would be limited by the relatively small size of the reserve, which only contains 1 million barrels of diesel.
When diesel prices increase more than gasoline this leads to supply concerns. For a truck that fuels up with 125 gallons or more, that several hundred dollars extra at every filling can result in higher costs for anyone who buys anything that gets shipped, from food to home goods to automobiles.
The impact is literally affecting every aspect of our lives and our economy. Diesel is used in farming. It’s used in a lot of industrial machine processes. All the machinery runs on diesel. A lot of construction runs on diesel. Trucks run on diesel, trains run on diesel, and planes run on jet fuel, which is also diesel. Heating oil is also diesel fuel, and so is marine gasoil, which is a form of diesel.
Diesel impacts the backbone of everything we do, whether it’s moving things around the world, harvesting, or producing anything in a factory. Almost every human activity has some element of diesel consumption.
US refiners have increased their operating rate to 92 percent, much higher than last year. Some refineries can also change the mix of fuels they produce and could increase diesel production. But there are more complicated issues impacting refining. Two US refineries are in the process of transitioning to becoming biofuel facilities. Refineries in California, North Dakota, Wyoming, and the Newfoundland Province of Canada are among those that have been or are in the process of being repurposed to make renewable diesel and sustainable aviation fuels.
The Bottom Line
The world’s businesses run on diesel. Diesel is at record highs and as high as it’s ever been relative to gasoline costs, and that’s impacting inflation in a meaningful way. It has negative consequences. High gas and diesel prices are not good for anyone. President Biden seems to praise high gas prices as ‘an incredible transition’ Americans must go through.
What do you think?
There is so much more to discuss on this, put your comments below and let’s start the conversation.
Lauren is the CEO of Automotive Aspects and the Editor-in-Chief of Car Coach Reports, a global automotive news outlet. She is an automotive contributor to national and local television news shows, including Fox News, Fox Business, CNN International, The Weather Channel, Inside Edition, Local Now News, Community Digital News, and more. Lauren also co-hosts a regular show on ABC.com with Paul Brian called “His Turn – Her Turn” and hosts regular radio segments on USA Radio – DayBreak.
Lauren is honored to be inducted into the Women’s Transportation Hall of Fame and a Board Member of the Buffalo Motorcar Museum and Juror / President for the North American Car, Utility & Truck of the Year Awards.
Check her out on Twitter and Instagram @LaurenFix.
