$6 a gallon for diesel fuel: Record prices zap truckers in Northeast and California
Russia supplies natural gas to much of Europe but its decision to cut off supplies to Western allies could have a ripple effect that hits American consumers, experts say.
Diesel fuel prices hit a record $5.37 a gallon on average nationally Monday and rose above an average of $6 in several Northeastern states and California, analysts reported.
The cost increase results as countries stockpile diesel and other fuels out of fear that Russia will cut off natural gas supplies to more European neighbors.
The cost of a gallon of diesel fuel in the U.S. rose 12 cents a gallon since $5.25 a Saturday alone. It was up 29 cents in a week, AAA's Fuel Gauge Report shows. Before the current price rise, the previous record was $5.13 a gallon set March 12.
Diesel fuel is crucial to the American economy, powering big-rig trucks, locomotives and ships that bring the vast majority of goods to market. Higher diesel prices can easily translate into higher prices for food in supermarkets and for just about anything else sold in stores.
Prices now average above $6 a gallon in Pennsylvania, New York, New Jersey, Vermont, Rhode Island, Connecticut, Massachusetts and California. In the Golden State alone, they were $6.45 a gallon.
Only three states had diesel prices below $5 a gallon. They included Georgia, Mississippi and the state with the lowest prices of all, Wisconsin, at $4.89 a gallon.
As diesel prices skyrocket, gasoline prices have started rising again as well. They were up seven cents over the past week to an average of $4,20 nationally on Monday., The Biden administration ordered more oil pumped from the nation's Strategic Petroleum Reserve recently after an outcry about high gasoline prices.
The price spread between diesel and gasoline has widened. Diesel cost 20 cents more a gallon a year ago when the oily fuel averaged $3.08 a gallon. On Monday, the difference between the two was $1.17 and rising.
In the case of diesel, however, the price rise is being driven by the fallout from Russia’s decision to use its natural gas exports as an economic weapon. It announced it will cut off supplies to Poland and Bulgaria, apparently in retribution for the two nation's support of Ukraine following Russia's invasion.
Other European nations that rely on Russia's natural gas immediately started considering contingencies in case they get cut off as well. Greece outlined plans that included switching from industries from natural gas to diesel fuel along with other moves like increasing liquefied natural gas storage capacity and reversing a program to reduce coal consumption.
As for Poland and Bulgaria, “the cutoff has already drastically raised the price of diesel worldwide,” said Tom Kloza, global head of energy analysis for the Oil Price Information Service.
Kloza said the prospect of $6-a-gallon diesel fuel in the U.S. “no longer represents hyperbole.”
When it comes to "distillate" fuels like diesel, home heating oil or jet fuel, the fallout from Russia’s invasion of Ukraine shows prices “can go parabolic at any moment.”
The Russia-Ukraine conflict once again shows just how intertwined global energy markets have become. The fallout goes far beyond Poland and Bulgaria, two countries labeled by Russia as “unfriendly” amid its war in Ukraine. Bulgaria's prime minister blasted the move as "blackmail."
Russia, which supplies natural gas to much of Europe, is demanding the two nations pay in rubles, which they have refused to do.
Russia had so far limited its use of energy exports as a weapon against Western nations even as they have supplied weapons to Ukraine. The payments Russia receives for natural gas are a buttress against the economic sanctions that have been imposed on it for initiating the brutal war.
The U.S. is the world’s largest producer of natural gas, but Russia is the largest supplier to Europe. Its exports accounted for about 39% of the continent's supply as of 2018, McKinsey reports. Norway was a distant second at 27%.
The U.S. has long exported diesel fuel to South America. Europe may look to the U.S. as an alternative to its Russian supplies in event of a cutoff, Kloza said.
Contributing: The Associated Press
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