US diesel hits an all-time high as Saudi pipeline shutdown lifts crude; rail grain surcharges up 153%
Diesel is at a record high in the US, and anyone buying fuel by the truckload is paying for it right now. The jump came after crude spiked Monday: Brent touched $108 and US crude hit $103 a barrel once Saudi Arabia shut its East-West Pipeline and talks over the Strait of Hormuz got pushed back. Saudi Arabia's energy ministry said Friday the line was shut as a precautionary measure and gave no restart date.
Rail surcharges
The clearest hit to freight costs is on the rails. Fuel surcharges on US grain shipments reached 48 cents a mile per rail car in the second week of September, up 153% from the weighted average a year earlier, according to USDA data. Railroads use surcharges to recover most of what they pay for fuel, then stack them on long-haul rates. At these levels the surcharge was running around 11% of the freight bill, and it lands in harvest season when farmers are already carrying higher production costs. What hits grain shippers by rail hits truckers hauling the same freight, because the diesel bill underneath is the same.
Why refineries aren't the fix
Don't expect refiners to bail out the diesel market fast. RBN Energy points out that fat crack spreads don't automatically pull more product out of US refineries when those plants are already running hard, and disruptions overseas can drain US inventories no matter what margins say. Refiners have every reason to make diesel and little room to make more of it.
The politics
The crude story now has Washington in it. Trump is scapegoating Kyiv over diesel costs while pushing a peace deal, per Politico, and separately is demanding Russian refineries be spared as diesel climbs, per Rigzone. Ukrainian strikes on Russian refining capacity have been one more thing taking product off the global board, so how that pressure plays out feeds straight back into what US carriers pay at the rack.
US biodiesel exports
One piece of good news for US producers: the UK confirmed it won't impose anti-subsidy duties on US hydrotreated vegetable oil biodiesel, even after its Trade Remedies Authority found the fuel was subsidized and recommended duties of around £258 per tonne. The regulator decided the duties weren't in the UK's economic interest. That keeps a UK outlet open for US HVO volumes.
What to watch
Watch for a Saudi restart date on the East-West line and whether Hormuz traffic recovers from its current trickle. If the strait reopens and the pipeline comes back, crude could ease and take some pressure off diesel. Until then, surcharges keep climbing.