Diesel Futures Are Up Almost 70 Cents/Gallon This Week

Diesel futures are up almost 70 cents/gallon this week as Thursday’s reversal proved short lived and the energy complex quickly resumed its march higher. Supply fears seem to be the driving force behind the market action this week, putting demand fears back on the back burner for petroleum prices, even though they remain front and center in equity markets.

The OPEC production cut announcement is getting most of the credit for the run-up in prices this week, but refined products have been far outpacing the gains in crude oil as signs of physical supply shortages for finished fuels are popping up around the US, and around the world.  

Adding to the strength in refined product prices this week are the ongoing strikes at French refineries that are limiting output at 4 plants, and cutting the country’s production by nearly 750,000 barrels/day. Retail stations in the country are now reporting widespread outages, even as the government has tapped its strategic reserves.  A major difference from US pumps is that the majority of vehicles on roadways in France (and many other parts of Europe) are powered by diesel instead of gasoline, and those supplies are running out frequently. 

Thursday was a rough day for fans of electric vehicles.  Ford announced that it would need to raise prices for the 2nd time in 2 months on its eagerly anticipated, formerly known as affordable, F150 lightning. That announcement came right on the heels of a report that a quarter of EV owners are paying $1,000 or more a month in financing to drive those cars.  Then, to top it off, reports broke that EVs waterlogged by Hurricane Ian are now exploding due to corroded batteries.

Hurricane Julia is expected to form in the Caribbean over the next several days, targeting Central American nations that were battered by a pair of major storms 2 years ago. The good news is that this storm is projected to “only” reach category 1 status at this point, vs the pair of category 4 storms 2 years ago, and for energy suppliers this should be a non-event. 

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