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After an impressive run that saw U.S. diesel prices fall for 62 consecutive days, diesel prices at the pump rose overnight on Tuesday, snapping the longest losing streak in two years thanks to farmers stockpiling fuel for use during the harvest season.
U.S. national average diesel prices have climbed to $4.977 per gallon, marking the first time they have done so since peaking at $5.816 in mid-June according to AAA data. However, the latest turnaround in pump prices comes as little surprise considering that diesel futures contracts have jumped more than 20% in a little over two weeks.
Owners of gasoline-powered vehicles have been luckier as gasoline prices have contracted for 71 straight days to $3.883 per gallon, good for the second longest losing streak in nearly two decades. But whereas high gasoline prices have been the focal point of President Biden’s administration, it’s diesel that actually powers the U.S. economy. There’s, therefore, a big risk that rising diesel prices will lead to higher transport costs and eventually filter through to consumer goods if prices continue creeping up.
Midwest farmers are already paying significantly more for their diesel after agricultural demand helped propel Tulsa, Oklahoma, to the country’s most expensive wholesale hub for the fuel, even exceeding places such as Los Angeles and New York and, according to data compiled by Bloomberg. Readers should also keep in mind that U.S. consumers are also competing with overseas buyers for their diesel as the fuel continues being in high demand globally. Indeed, U.S. refiners have been exporting massive amounts of diesel to buyers in Europe and Latin America who are trying to ditch Russian energy commodities
But the situation could get even worse with prices facing upward pressure due to upcoming refinery maintenance which threatens to further deplete current low stockpiles. According to government data, U.S. distillate inventories, including diesel, are already at their lowest in more than two decades for this time of year.
By Alex Kimani for Oilprice.com
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Alex Kimani is a veteran finance writer, investor, engineer and researcher for Safehaven.com.