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Refining Crunch, Not Crude Costs, Driving Diesel Above $5.60

On-road diesel prices surged to the high $5.60s this week, driven by refining capacity constraints rather than crude oil costs hovering in the $80s. Crack spreads have ballooned above $100 per barrel, far exceeding their typical $15–$25 range, signaling a structural supply problem. Distillate inventories have plummeted to levels unseen since the late 1990s and early 2000s, a troubling indicator for carriers and shippers. Russian refinery damage from military strikes has eliminated critical global supply backfill, while elevated Gulf Coast diesel exports to shortage-plagued overseas markets further tighten domestic supplies. Geopolitical tensions continue keeping margins elevated. Additional pressure looms as hurricane season approaches, with potential El Niño activity threatening Gulf Coast refining infrastructure in the coming quarters. Industry observers expect diesel prices to remain above $5 through the foreseeable future.