US diesel hits four-year high as Iran war and Russian export ban tighten supply
US diesel is at its highest since 2022, per Bloomberg, and haulers pay for it first. The two things pushing it are the Iran war and a Russian export ban, both pulling middle distillate out of the same global pool at the same time. Higher rack costs carry into freight and delivery before pump signs move.
Crude is the backdrop. Asian refiners have been chasing Middle Eastern grades hard enough to push Dubai futures close to $100 a barrel, and Chinese independents are paying a $7 to $10 premium over Brent for Russian ESPO to replace the Iranian barrels the US naval blockade cut off. When the marginal barrel is that expensive worldwide, US crack spreads hold up and product stays firm.
Labor Day pump prices
GasBuddy put the national average for regular at $4.03 a gallon over the holiday weekend, a record for Labor Day and 87 cents above last year. California's average is running near $5.70, with San Bernardino County close to $5.60. For c-store operators that means higher card fees on every fill and thinner fuel margin if street prices lag the wholesale climb, which they usually do on the way up.
Refinery utilization is running at an eight-year high, per RBN, and product cracks are strong. Plants are making all they can and the barrels are still tight, so the tightness is coming from supply.
The small refinery exemptions
EPA granted small refinery exemptions to 29 small refineries, releasing them from the renewable fuel obligations they would otherwise meet by retiring RINs. The Renewable Fuels Association's chief pushed back, and the exemptions land right as California authorized E15, which the biofuel side is calling a bright spot. For jobbers, waivers on this scale loosen RIN demand and can move the economics of blended versus clear product at the rack. Watch your RIN costs and your blend spreads over the next few weeks, because a batch of exemptions this size moves the credit market.
Russian refineries offline
Ukraine's defense ministry says its August drone campaign hit 12 Russian oil refineries and two defense plants, reaching 1,900 kilometers from the border. Russia's second-largest refinery has halted crude processing after one of those strikes. The strikes feed US diesel prices from the supply side of the export ban. When Russian refining capacity goes down, Moscow keeps more crude and ships less refined product, and the distillate that would have reached the global market stays home. The barrels the rest of the world loses have to come from somewhere, and right now they are coming out of tight US inventories.
The SPR is another soft spot. Crude stocks are down again and the reserve is drawing lower, which leaves less cushion if another shock hits.
What to watch
The Strait of Hormuz: Middle East LNG and crude flows both hinge on whether it stays open. Watch for more EPA small refinery exemptions and what they do to RIN prices. And watch whether US distillate inventories keep drawing while Russian refining stays down. Diesel could ease if the fighting pauses and runs stay high, but nothing in this week's data points that way yet.