The diesel prices in the United States of America has hit a record high of US$6.50 a gallon as conflicts in Iran and Yemen add to global supply disruptions.
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National average reached US$6.5107 per gallon on Monday, up from US$6.23 a week ago and US$5.58 a month ago, according to the American Automobile Association (AAA). Diesel in the US now costs about 76% more than a year ago. In litre terms, the ATH price translates to US$1.72 per litre.
This diesel prices in the US is not exclusive, Oilprice.com reported that in Europe, fuel prices are soaring, and shortages are looming over already struggling economies.
The global diesel shortage has been exacerbated by the US war with Iran and disruptions to energy flows through the Strait of Hormuz. Houthi advances along Yemen’s Red Sea coast have added further uncertainty, raising concerns over shipping through the Bab el-Mandeb Strait and Saudi oil exports.
There is simply not enough refining capacity in the world to make up for the loss of Middle Eastern and Russian barrels. Last week, Russia said it would extend a ban on diesel exports until the end of October, as Ukrainian drone attacks on refineries continued.
However, the loss of fuel supply from the Middle East is much larger, the Wall Street Journal reported last week, citing figures from the International Energy Agency showing the amount of diesel output lost in the Middle East was three times as high as lost Russian supply.
Media reports indicate that Washington is debating a diesel export ban to ease domestic prices. Europe on the other hand is particularly vulnerable, having closed significant refining capacity while becoming increasingly dependent on imported crude and refined fuels from the Middle East and other regions.
US Rep. Tim Burchett tabled a bill to that effect last week, and Senate Majority Leader John Thune has backed the proposal. Energy Secretary Chris Wright and Interior Secretary Doug Burgum however oppose it as a bad idea that would ultimately backfire.
Diesel is crucial to the US economy, powering much of the country’s freight transport and farm machinery. Higher prices can therefore feed into the cost of transporting and producing goods, adding to inflationary pressure.
Nnamdi Maduakor is a Writer, Investor and Entrepreneur
