US diesel jumps nearly 30 cents as global supply crunch looks set to last through winter

Diesel climbed nearly 30 cents, and the reason it may stay high is a refining shortage that trading executives say could run into next year. For haulers, that lands on the fuel surcharge line first. Every mile you run at these numbers costs more, and the surcharge only catches up after the pump already moved.

The refining gap

The shortage is in product, not the barrel. Russell Hardy, who runs Vitol, put it plainly at an industry conference in Asia: "There's really a shortage of products because we're missing 2 million barrels a day from Russia, and we're missing nearly 2 million barrels a day from the Middle East." Reuters, citing refining and trading executives, reports the tightness could last through winter for lack of enough refining capacity to replace those lost Russian and Middle Eastern runs.

You can have plenty of crude and still be short diesel. Diesel comes off a refinery, and if the plants that made it are offline or sanctioned, more crude on the water does not fix the pump. That gap between crude supply and finished diesel is what these executives are pointing at.

What it does to surcharges

A near-30-cent move in diesel feeds straight into carrier costs, and one report on the spike already ties it to higher operating costs across trucking and equipment fleets. Surcharges reset on a lag, so a carrier running spot freight or older contract language may eat part of this week's jump before the pass-through catches up. Jobbers hauling to accounts on fixed delivered pricing face the same squeeze from the other side.

China's exports

China's crude buying rebounded and its fuel exports rose 29%. More Chinese product moving into the market could take some pressure off the global diesel shortage if those barrels keep flowing, though export volumes there swing on Beijing's quotas and can pull back without warning. Worth tracking, but more Chinese exports would ease the shortage, not end it.

What to watch

Whether Chinese and other Asian refiners keep pushing diesel into the export market, and how fast, is the near-term swing factor on supply. Watch the EIA weekly retail diesel average for how much of this week's jump sticks, since most surcharge formulas key off it. And watch contract renewals: carriers with surcharge language written for cheaper fuel could find themselves short if the tightness holds into winter the way the trading desks expect. If refining capacity stays offline, diesel prices could stay high into spring.