US diesel hits a record price. Half of past records jumped again within four weeks.

What happened

The US average price of diesel crossed $6 a gallon for the first time on 10 September, according to GasBuddy, a day after the government’s weekly survey put the national average at a record $5.967.

The Energy Information Administration (EIA), which runs the government’s weekly survey, found the price 36.8 cents higher than a week earlier. The FT put the move past $6 down to the supply shock from Iran. The record it replaced, $5.810, had stood since June 2022.

Diesel now costs $1.81 a gallon more than regular petrol. Petrol averaged $4.157 in the same survey. It is the widest gap in the EIA figures, 20 cents above the previous high of November 2022. The squeeze is in diesel itself more than in crude oil.

US stocks of distillate, the group of fuels that includes diesel, stood at 106.3m barrels on 4 September against 120.6m a year earlier, so refiners enter the heating season with little in reserve.

The price is already a political issue. The BBC put the AAA national diesel average at $5.85 on 4 September, against $3.71 a year earlier, with Washington state at $6.81.

The Strategic Petroleum Reserve, the government’s emergency oil store, has fallen to 285.4m barrels after this year’s releases. California’s average hit $7.764, and five stations showed $9.999, the highest price a four-digit pump display can show.

Sources: Reuters, EIA (2, 3, 4), FT, BBC, Independent

The Pattern

We looked at every new all-time high in the government’s weekly US diesel price since the figures began in 1994, counting it only when the old record was at least six months old. We checked whether the price went on to reach 4 per cent above that first record within the next four weekly surveys. We found six such records, and three did.

The Read

History says the price keeps rising, and the open question is how fast. Pump prices follow wholesale prices with a delay of weeks. That is why all six earlier records were beaten again within four weeks, even the slow one of December 1995. A further 4 per cent is harder. This run starts faster than most: the average jumped 6.6 per cent in the week to 7 September, more than in four of the six earlier cases and behind only March 2022. Distillate stocks are 12 per cent below last year, and GasBuddy’s daily average has already passed $6.

The case against rests on demand and politics. The International Energy Agency warned on the same day of a lost period for world oil demand. Distillate stocks rose by 2.1m barrels in the week to 4 September, and the administration is promoting a Venezuelan supply deal before a November election. Two of the three misses, 2000 and 2003, stopped within a cent or two of the line, so a market set at 4 per cent can fail on a rounding. If crude oil gives back its rise above $100, the same delay that is carrying diesel up will keep the pump price flat, and the $2 gap and California’s $8 would go with it.

Sources: EIA, FT, BBC