Diesel hits record prices into harvest as Ukrainian drones knock out Russian refineries
Diesel is hitting record prices just as harvest demand ramps up. In North Idaho, businesses and households are already cutting back as diesel costs hit records, and shippers warn the added freight could show up in grocery prices within weeks. Farm-belt suppliers report diesel climbing ahead of the harvest run, which is poor timing for grain haulers and anyone running a fleet.
Part of the pressure is coming from a long way off, and it matters here because product moves on a world market.
The Russian refinery strikes
Ukraine hit two major Russian refineries overnight into September 13. Drones struck the Slavyansk-EKO refinery in Krasnodar Krai and the TANECO complex in Nizhnekamsk, Tatarstan, with fires reported at both. The General Staff also confirmed that a September 11 strike damaged the ELOU-AVT-6 primary crude distillation unit at the Saratov refinery, which is the front end of a plant where crude first gets processed.
Both are large plants. Slavyansky can run about 5.2 million tons of oil a year and makes gasoline, diesel, fuel oil, vacuum gas oil, and jet. TANECO, roughly 1,200 kilometers from the Ukrainian border, produces gasoline, diesel, aviation and marine fuel, and base oils. Take that much refining offline and Russian product exports tighten, which pulls on global diesel and gasoline balances. US operators don't buy Russian barrels, but a tighter world product market lifts the price of what you do buy.
Trump's refinery push
President Trump called oil executives to the White House to press for reopening shuttered refineries and building new ones, arguing more capacity is the key to lower gas prices. A White House spokesperson said the energy team will keep supporting expansion and new construction.
Don't build your buying plan around it. As CNN reported, more US refineries won't bring prices down in the near term and probably not in the long term either. No new US refinery with significant unit capacity has come online in decades, and nothing about the current economics changes that math for a jobber pricing racks this quarter.
Iran and the Strait of Hormuz
Shipping attacks near the Strait of Hormuz are stoking fresh fuel oil supply fears. At this year's Asia Pacific Petroleum Conference, per Reuters, the industry was bracing for a prolonged US-Iran conflict in the Gulf, with little hope of quick resolution and expectations of higher prices for longer.
That's sentiment at a conference, and sentiment drives hedging. If the market prices in Gulf risk, that premium shows up in crude, and crude sets the floor under your diesel cost.
What to watch
Whether Ukraine keeps hitting Russian refining capacity, and whether the damaged units come back fast or stay down for weeks. Longer outages mean more sustained pressure on global product. Watch harvest diesel demand across the farm belt, which could keep pulling barrels tight into the fall. And watch the Strait of Hormuz. If shipping stays disrupted, the risk premium in crude could hold, and diesel with it. If the Gulf calms and Russian units restart, some of this could ease off the records just as fast as it built.