Diesel prices remain elevated despite Trump's moves to boost supplies
USO•U.S. diesel prices reached $6.28 a gallon, up 70% since the U.S.-Israeli war with Iran began, despite moves to release emergency reserves and allow tax-exempt red-dyed diesel on public roads. Retailers have been slow to sell the dyed fuel, while U.S. distillate inventories remain near 23-year lows.
1. Prices remain high
U.S. diesel prices reached $6.28 a gallon on Friday, up 70% since the U.S.-Israeli war with Iran began. The G7 agreed to release 100 million barrels of oil and petroleum products, but the barrels appear to largely cover what remains of a March emergency release, rather than represent new supply. A White House official said the earlier commitments were not specifically for refined products and that the administration had arranged for the barrels to be released with diesel, beginning immediately.
2. Limited uptake of dyed fuel
An executive order allows red-dyed diesel on public roads through year-end, deferring the federal highway tax of 24.4 cents per gallon and waiving penalties for using off-road fuel on highways. Retailers and marketers have been wary of selling it because of unclear tax liabilities, logistical hurdles and potential fines when trucks cross state lines. The White House says more than 4,000 retailers distribute dyed diesel and that Treasury guidance will clarify the rules.
3. Supply constraints persist
Analysts cited conflicts in Iran and Ukraine and disruptions to energy flows from the Middle East as contributors to a tight global market for refined products. Baringa economist Caspian Conran said the measures could provide “probably a few weeks of relief,” rather than a durable solution. Rapidan Energy Group president Bob McNally said a durable end to the conflicts was the only thing, aside from a recession that sharply reduces consumption, that could prevent oil prices from rising further and put them on a sharp downward trajectory.
