USDA to send farmers $8 billion for diesel as pump prices stay above $4 and crude tops $110
The USDA will send one-time payments to eligible farmers to cover diesel for this year's harvest, Agriculture Secretary Brooke Rollins announced, framing it as certainty for growers heading into the field. Diesel costs are hitting haulers and c-store operators as hard as they hit the farm.
The American Transportation Research Institute put a number on the pain. Fuel prices ranked as the top industry concern in ATRI's annual survey, number one for drivers and number two for carriers, after not even cracking the top ten the prior two years.
Diesel margins
Tight diesel supply is propping up refining margins in some regions while soaring freight and insurance costs undercut refiner economics elsewhere, per JobbersWorld. That split explains why your rack number can move against crude. Asian refiners are already adjusting, switching to smaller tankers and buying delivered crude to dodge freight rates, Reuters reports.
For a jobber, the takeaway is simple. Your landed cost has two moving parts now, the product and the freight to move it, and both are working against you at once.
Crude at $110
Brent hit a five-month high and oil topped $110 a barrel as traders priced in Middle East supply risk, including attacks on ships and Saudi sites. The wire reports don't line up with the pump-side read: CStore Decisions, citing AAA, had crude only nearing $100 and the national pump average at $4.33, down a few cents on the week. The newer wire reports put crude a full ten dollars higher.
Drone strikes added to the supply worry. Ukrainian drones set a pumping station ablaze on the Druzhba pipeline and hit Russia's Michurinsk, and Trump's reported midterm diesel fix runs through a deal with Russia. If the strikes keep landing, the relief deal and the barrels behind it get harder to count on.
Pump prices
Gasoline is holding above $4 and has been since late July, more than a dollar over this time last year. The regional spread is wide. Butler, Pennsylvania jumped 16 cents to $4.75, with Latrobe at $4.80 and Altoona at $4.48. The Mahoning Valley in Ohio is at $4.00, up 20 cents on the week but 50 cents off its month-ago level thanks to the state's 90-day, 38-cent gas tax holiday. That holiday is the reason Ohio operators are undercutting their neighbors, and it has an expiration date.
The Linden lockout
Phillips 66 locked out nearly 400 Teamsters at its Bayway refinery in Linden, New Jersey after a contract extension expired at 4 p.m. Monday. The original contract lapsed October 1. Local 877 says members are working 13 days on and 13 nights on before a day off and want a bigger share of profits. Pickets went up overnight. Bayway is a major East Coast supply point, so a prolonged lockout could tighten the regional barrel.
What to watch
Three things. Will the $8 billion reach farmers before harvest closes, and on what eligibility terms? Can Bayway keep output up on management staffing? And does that $10 gap between the AAA crude read and the $110 wire prints show up at the rack next week?