Wholesale diesel prices in the spot market of New York harbor, a key pricing point, have surged this week to more than $200 per barrel. Excluding a brief interval from late April into mid-May, that would be a record high.
As a result, American refiners are enjoying the best-ever diesel margins, with the profit of turning a barrel of crude into one of diesel – i.e., the diesel crack spread – hitting a record high of $86.5 per barrel, up roughly 450% from the 2000-2020 average of $15.7 per barrel.
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- Second, foreign demand is also strong, with American diesel exports running at unusually high level.
- Third, and according to many, most important of all, the US also has lower refining capacity than before, reducing its capacity to make fuels.
- Fourth is Russia’s invasion of Ukraine. The US was importing a significant amount of Russian fuel oil before the war, which its Gulf of Mexico-based refiners turned into diesel. The trade ended after the White House sanctioned Russian petroleum exports.