Diesel shortage could run into 2027, IEA warns, as price jumps 20 cents in hours past $6 a gallon
Diesel jumped 20 cents a gallon in a matter of hours this week and the IEA says the shortage behind it could persist well into 2027. For anyone hauling fuel or running a diesel fleet, that is the number that matters most today. The pump price is above $6 a gallon, off the all-time high north of $6.50 but still high enough to rewrite every delivery quote you wrote last month.
The supply side is doing this, not demand. European refinery margins have collapsed as input costs ran up, and FreightWaves quoted traders saying the market is "running out of bullets" as inventories drain. Add Brent above $106 and WTI at $94.72 on the Iran war, with Houthi strikes on Aramco refineries and tanker attacks threatened in the Strait of Hormuz, and the crude feed into diesel looks tight for a while.
What this means for a jobber is simple. Your diesel allocation may get thinner before it loosens, and the spread between what you buy and what you can charge could stay wide. Build the volatility into contracts now rather than eating it on fixed-price deals.
Gasoline and the CPI
Gasoline ran up 7.1% last month, with AAA's national average at $4.3413 a gallon. That is barely moved from a month ago, so the pain is the level, not fresh day-to-day moves.
The macro read lands today. Economists polled by Reuters see September CPI at 0.6% on the month, and energy is doing the heavy lifting. For c-store operators, higher pump prices squeeze the inside-store basket when customers have less left over after filling up, and that is where your margin actually lives. Watch your fuel-to-inside ratio over the next few weeks.
Somerset biodiesel
Continental Refining is doubling biodiesel capacity at its Somerset, Kentucky plant, with the expansion started in August and completion targeted for November 15. The company is pushing ahead even though its soybean processing unit on the same 77-acre site has been shut since a July 5 fire and will stay offline this season.
The timing is worth a look. With diesel this tight and this expensive, more domestic biodiesel coming online by mid-November could give blenders in the region a little more product to work with heading into winter. It is one plant, so do not expect it to move the national number, but regional buyers near Somerset may see it.
Running the biodiesel line without the soybean feedstock unit means CRC is buying its oil input rather than crushing its own. That raises their cost basis, and whether the expansion pencils out depends on where feedstock and diesel prices land through the quarter.
What to watch
Today's CPI print sets whether the Fed gets room to ease, and energy costs are the swing factor. On diesel, watch inventory draws and whether any refinery capacity comes back; the IEA's 2027 call assumes the tightness holds. Murkowski and a bipartisan group of senators are pushing Trump to reverse a Russian diesel deal, so that is a supply wildcard in Washington. And keep an eye on Hormuz: if tanker attacks escalate, crude could climb further and drag diesel with it, but prices could ease if the strait stays open.