Diesel hits record $6.183 a gallon as Saudi pipeline shutdown pushes Brent to $108
The national average diesel price is $6.183 a gallon, up 31.6 cents in a week and a fresh record, after Saudi Arabia shut its East-West crude pipeline and Brent touched $108. For anyone hauling freight or pricing a delivered load this morning, that is the number that matters. Gasoline moved too, with the national average climbing and Columbus stations averaging $4.21, up 27.3 cents on the week.
The pipeline
The East-West line carries Saudi crude from the eastern oil fields to Yanbu on the Red Sea, which is how the kingdom ships barrels without sending them through the Strait of Hormuz. Saudi Arabia shut it Friday as a precaution after drone attacks launched from Iraqi territory near the Iranian border caused injuries. The energy ministry did not say when it comes back.
The timing is what put a bid under crude. Hormuz was already thin, with just 14 commodity vessels observed crossing in either direction over the weekend, single digits a day against a 10-day average of 14 a day. Take the pipeline offline on top of that and you have removed the main workaround for the strait at the same moment the strait itself is barely moving. Analysts quoted in the coverage put as much as 4% of global supply at risk.
Brent hit $108 earlier Monday before easing to $107.22. WTI was $102.66. Crude could come back in if the pipeline restarts quickly and Hormuz traffic normalizes, and it could run higher if the attacks continue and the postponed Gulf-Iran talks stay stalled.
Why the pump moved this fast
Record crude does not automatically mean refiners make more diesel. RBN's latest walks through why: US refineries are already running hard, so a high crack spread does not buy you much additional output when there is little slack left to run. When a disruption abroad pulls barrels out of the global pool, it drains US inventories rather than lifting US production, and thin diesel stocks are what turn a crude spike into a pump record this quickly. Haulers are paying for that thin cushion at the pump right now.
Rail surcharges bite the farm belt
Diesel is also showing up in freight bills. Railroad fuel surcharges on US grain shipments reached 48 cents a mile per car in the second week of September, up 153% from a year earlier, according to USDA data cited by Reuters. Surcharges accounted for 11% of the rate. This lands in harvest season, when farmers are already carrying higher production costs, and it raises the delivered cost of moving grain to market. Jobbers serving ag customers should expect the diesel line to keep drawing complaints as long as the benchmark holds up here.
What to watch
Whether the East-West line restarts and how fast Hormuz traffic recovers, since both feed straight into crude. Diesel inventories, because that is the tank that decides how much of any further crude move reaches the pump. And the Fed, which meets this week: CME data has about 90% of trading-desk respondents expecting a 25 basis point hike, with Middle East supply fears cited as the inflation driver. A rate move plus record diesel is the combination that could start pressuring freight demand if it holds.