Why did the diesel retail-wholesale spread widen to 1.654 this month?
The diesel retail-wholesale spread is 1.654, up 0.354 over the past month. That gap is the retailer's gross margin on a gallon of diesel, the distance between what a station pays for the fuel and what it charges the truck. The question worth asking is what pushed the two prices apart, and who ends up holding the wider cut.
Start with what the spread actually measures. It is retail price minus wholesale price, so a wider spread means the per-gallon margin at the counter grew by about a third of a dollar over the month. The margin is landing with the retailer. Before crediting that to anything the retailer did, the number only tells me the gap grew. It does not tell me whether wholesale fell under a steady retail price or retail climbed while wholesale held. The data I have is the spread, not the two prices that make it, so I will have to work the gap from the edges.
The obvious read is that fuel got more expensive across the board and retail rode it up. Gasoline at retail is 4.496, up 4.7% over the month, so pump prices for the other main product did rise. If diesel moved with it, a retailer holding its markup would see the absolute margin widen on a higher base. That fits part of the picture, but it does not explain a wider spread by itself, because a flat percentage markup on a higher price is a different thing from a wider gap.
The input side cuts against the easy story. WTI crude is 90.52, down 5.8% over the month. Crude is the largest cost in a gallon of diesel, and it fell. A falling input usually pulls wholesale diesel down with it, and a falling wholesale price, if retail is slow to follow, widens the spread on its own. Sticky retail over soft wholesale is the classic way this gap opens. So the crude drop could be doing the work, with the station still charging close to last month's price while it buys cheaper.
The refining numbers complicate that. Refinery utilization is 92.7, down 5.2% over the month. Fewer barrels are being run, so less finished product is coming out the gate. The 3:2:1 crack spread, which measures what a refiner earns turning crude into gasoline and diesel, is 64.34, up 3.28 over the month. Refiners are earning more per barrel on the products they make, which happens when product prices hold firm while crude eases. A firm wholesale product price is the opposite of the soft-wholesale story. If wholesale diesel is holding up because supply is tight, then the retail-wholesale gap did not widen because wholesale fell.
Both cannot be fully true at once, and the wire reporting leans toward the tight-supply side. Reuters reports that moves to boost diesel supplies have not yet lowered prices. CNN asks why gas and diesel are still expensive with the Strait of Hormuz open. Trade coverage is calling a diesel shortage this month. Freight is part of it: OilPrice.com reports supertanker rates hitting a level that has effectively shut the arbitrage carrying U.S. Gulf Coast crude to Asia, which keeps barrels moving in patterns that do not relieve the product tightness. The picture from the wire is diesel staying expensive at the pump while crude comes off, which is exactly the condition that widens a retail-wholesale gap.
Henry Hub natural gas is 3.133, up 11.0% over the month, with storage at 3500, up 7.6%. Gas is what a refinery burns to run its units, so a higher gas price is one more cost pushing against any decline in wholesale product prices. It is a small weight next to crude, but it leans the same way as the utilization and crack numbers: wholesale diesel has reasons to hold firm even while crude falls.
Where the easy answer broke is the assumption that a 5.8% drop in crude should be reaching the pump by now. It has not. The crude decline is being absorbed before it gets to wholesale diesel, because refineries are running less and finished diesel is tight, and the crack spread shows refiners keeping the difference rather than passing it down. So the input fell, the wholesale product price did not fall much, and retail held. The gap between wholesale and retail still widened by 0.354, and without the two component prices I cannot prove whether that last step came from wholesale slipping a little or retail holding firm against a tight market. Both would show up as the same wider spread.
What I am sure of is where the margin is landing. It is landing in two places. Refiners are earning more per barrel, with the crack at 64.34, up 3.28. Retailers are earning more per gallon, with the spread at 1.654, up 0.354. The one party earning less is the crude producer, with WTI down 5.8%. The money moved downstream, from the barrel toward the counter.
I cannot pin down the exact mechanism in that last step. What I know is that the gap grew and the retailer is holding it, and I would want the standalone wholesale and retail diesel prices before I claim the station pushed its price up rather than simply held it while buying cheaper. The direction is clear. The precise cause inside the gap is not, and I will not pretend the spread alone tells me.
And that was just the data. See you tomorrow.