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Diesel prices hit yet another new record on Wednesday at $5.43 per gallon, now some $1.2 more than a gallon of gasoline, according to AAA.
While high prices at that pump for gasoline have somewhat leveled off, diesel continues to steadily rise, causing an increase in prices of consumer goods because it fuels the trucks that transport an estimated 70% of consumer goods freighted in the United States.
With diesel prices now up more than 75% from the year-ago average, Syracuse University supply chain expert Professor Patrick Penfield told New York’s WGRZ that there is usually a “correlation”.
“Every 10% that fuel prices go up there's a point three percent increase in inflation. So that's what consumers are going to see - you're gonna keep seeing prices go up," Professor Penfield said.
Soaring diesel prices are further threatening the supply chain along with the trucking industry.
Citi noted in a Monday report that diesel prices increases up to that point had already led to decline in the freight industry’s free cash flow from 21% in March to 19% in April.
Russia’s war on Ukraine has led to a tightening of global diesel supplies and soaring margins for U.S. refiners who are exporting record volumes from the U.S. Gulf Coast region, with the EIA reporting Wednesday that distillate and gasoline inventories had declined once again with diversions to exports.
Gasoline inventories fell by 2.2 million barrels for the week ending April 29, compared with a decline of 1.6 million barrels a week earlier. In middle distillates, the EIA estimated an inventory draw of 2.3 million barrels, compared with a decline of 1.4 million barrels for the previous week.
By Charles Kennedy for Oilprice.com
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Charles is a writer for Oilprice.com