On September 22, AAA recorded the highest U.S. diesel average ever, $6.53 a gallon, and on Friday it was still sitting around $6.50. A year ago Americans were paying $3.69.
Ten days ago, in Are We Headed for a Global Recession, , we wrote that this had stopped being a crude oil story and that the real problem was refined fuel, especially diesel. We also laid out a list of warning signs to watch. Five days later the government’s own numbers showed the diesel problem getting worse, and several of those warning signs have moved since.
Diesel by the Numbers
$6.53Record U.S. diesel average, Sept. 22 (AAA). A year ago: $3.69
600M galDiesel and heating oil missing from U.S. storage vs. a normal year
12% shortU.S. diesel and heating oil stocks vs. the five-year average (EIA)
1982Last time the Strategic Petroleum Reserve was this low
Crude Stocks Went Up Last Week and Diesel Stocks Went Down Again
The Energy Information Administration’s weekly report for the week ending September 18 showed U.S. commercial crude inventories rising 3.0 million barrels to 426.4 million, about 2 percent above the five-year average. In the same week distillate stocks, which is the diesel and heating oil you actually buy, fell another 0.4 million barrels to 107.5 million. That is 12 percent below the five-year average for this time of year, according to Global Energy Flow’s breakdown of the EIA data.
Twelve percent sounds small until you put it in gallons. A normal year would have about 122 million barrels of distillate in storage right now. The shortfall is close to 15 million barrels, which is a little over 600 million gallons of diesel and heating oil that are not sitting in American tanks going into winter.
The rest of the world is short too, and it is buying from the same supply. Reuters reported on September 15 that Ukrainian drone strikes had shut Russia’s Kinef refinery and left the Volgograd and NORSI plants running at about a quarter of capacity. Those three are among the six refineries that make roughly half of Russia’s diesel. In France, 16.5 to 17 percent of fuel stations were short on September 21, although that was driven by a government price cap more than a missing supply. When European buyers can’t get diesel from Russia or the Gulf, they bid for American diesel, and that bid shows up at your local truck stop.
Here Is Where They Stand Now
On September 18 we did not try to put odds on a collapse. We listed the specific things that would tell us an expensive fuel problem was turning into something worse, and we said that if five or six of them started happening at the same time, the conversation would change. Ten days later, here is the scorecard on the ones we can check against hard numbers.
| Warning sign from Sept. 18 | Status | What the record shows |
|---|---|---|
| U.S. distillate inventories keep falling into winter | Happening | Down again to 107.5 million barrels, 12% below the five-year average (EIA, released Sept. 23). |
| Diesel moves substantially higher and stays there | Happening | $6.23 on Sept. 14, a record $6.53 on Sept. 22, still about $6.50 on Sept. 25 (AAA). |
| More Russian refining knocked offline | Happening | Kinef shut, Volgograd and NORSI at about 25% of capacity (Reuters, Sept. 15). |
| Countries restrict fuel or food exports | Partly | Russia has already cut off diesel exports. Washington floated a 90-day diesel export ban this week, then denied it. |
| Food inflation accelerates | Building | Inflation hit 3.4% in August, up from 2.4% in January. Economists expect groceries to take the next hit. |
| Farmers or truckers report fuel they can’t get | Not yet in U.S. | American farmers are reporting record prices, not empty tanks. France had 16.5–17% of stations short on Sept. 21. |
Three of those are happening outright and two more are partway there. We are not at the point where the pumps go dry, and anyone telling you otherwise is selling something. But we are clearly closer than we were ten days ago, and every one of those rows moved in the wrong direction.
The last row is the one we said matters most. Expensive diesel hurts, but diesel you can’t get at any price is an entirely different problem, and right now America is still on the expensive side of that line. With distillate stocks draining and heating season about to start pulling on the same supply, that line is a lot closer than it was in August.
The Strategic Petroleum Reserve stood at 284.96 million barrels for the week ending September 11. That is the lowest level since 1982 and about 40 percent of the reserve’s 714-million-barrel capacity. Roughly 128 million barrels have been pulled out since early April as part of a coordinated international release after the Strait of Hormuz closed on February 28.
The reserve holds crude oil, and crude is the one thing the country is not short of right now. Commercial crude stocks are above normal. The fuel that is running out comes out of the other end of a refinery, and U.S. refineries were already running at 97.8 percent in early September, as we reported on September 15. There is no spare capacity to turn extra crude into extra diesel.
So the government spent about a third of the nation’s emergency oil supply on a problem that was not a crude problem. Every barrel pulled out this spring and summer is a barrel that will not be there for the next Gulf hurricane, the next refinery fire, or a real crude shortage if Hormuz stays shut into 2027. The Department of Energy has said the reserve’s safe operating minimum is around 70 million barrels, so it is not empty. It is lower than it has been in 44 years, and it did almost nothing to bring down the price of the fuel that is actually short.
Farmers Are Paying Record Prices in the Middle of Harvest
In northeast Missouri, Addie Yoder runs two combines, three semi-trucks and several tractors from mid-September to late October to harvest and haul her corn and soybeans. One combine takes 300 gallons of diesel, according to Reuters. At $6.50 a gallon, that is $1,950 to fill a single machine once. Yoder said the only thing she can do is cut other expenses.
Marty Gray owns Gray Farms in Watseka, Illinois. “Certainly, when I wake up in the morning, I’m thinking about diesel,” he told CBS News Chicago. “I’m thinking about the trucks running, the elevator and stuff like that.” His family farm is working on tight margins, and he is stuck making the same guess every farmer is making right now. “So, we’re just trying to decide do we fill up the tanks now, or do we need to wait a little bit? Will it get better, or will it get worse?”
Ranchers are in the same spot. Their pickups run the pastures every day checking herds and water pumps, and Andrew Coppin, whose company sells remote monitoring equipment to ranchers, told CBS that most of those trucks are 1-ton diesels “getting 12 miles to a gallon” on a good day. At today’s price, every mile a rancher drives to check on cattle costs more than 50 cents in fuel alone.
Why this matters to you: a farmer who loses money this fall decides this winter how much to plant next spring. Pivot Bio CEO Chris Abbott laid out how that works on Fox Business on September 24. “Higher diesel and input costs mean the marginal acre may come out of production or the marginal investment doesn’t happen. And so you get lower yield. When you get a lower yield, you get [a] higher price.” He said the country looks to be facing higher food and protein prices “for at least a year or so to come,” with fertilizer prices already climbing as growers start buying for 2027.
School Districts and Food Banks Are Cutting Services to Pay for Fuel
Cherry Creek Schools in Colorado runs more than 300 diesel buses that carry about 24,000 students. The district’s transportation director, Mark Ingram, told CBS News Denver it is facing an extra $500,000 in fuel this year, which pushes its fuel budget to about $2 million against the $1.5 million it planned for. The district is looking at consolidating routes and cutting some activity trips to cover it.
That extra half million works out to about $21 for every kid on those buses, and it has to come out of something else in the school budget. For parents it means a bus stop that might move farther from home, a longer ride for their kids, and a field trip or away game that quietly gets cancelled.
The Atlanta Community Food Bank will spend an extra $100,000 on diesel this year. “That would actually translate to about 122,000 meals that we would be able to provide if we didn’t have to spend that on unexpected diesel fuel prices,” Kenneth Hill, the food bank’s supply chain officer, told CBS News Atlanta. Those meals are going into truck tanks instead of to families, many of whom are at the food bank because groceries already cost more than they can pay.
Your Grocery Bill Is Next…
Diesel moves almost everything you buy, and the economists are already telling you where it hits first. “Prices for grocery store items, restaurants and delivery services are the most sensitive to higher diesel prices,” Oxford Economics lead U.S. economist Bernard Yaros wrote in a report cited by CBS. Inflation hit 3.4 percent in August, up from 2.4 percent at the start of the year, and EY-Parthenon chief economist Gregory Daco expects fuel alone could push it to 3.6 percent by December.
A family spending $1,000 a month on groceries and meals out doesn’t feel that as a percentage. At 3.4 percent, it is about $34 more every month at the register, stacked on top of what that same family is already paying at the pump and for heat this winter.
You can have grocery stores full of food while a lot of families can’t afford what is on the shelves, and you don’t need anything close to a collapse for that to wreck a household budget.
The Export Ban…
In Washington, the idea that keeps coming back is banning diesel exports. The U.S. refines more diesel than it uses and sells the rest overseas, and some Republican lawmakers want to keep it here. This week a 90-day ban was floated and then denied, and Energy Secretary Chris Wright said nobody was considering a flat ban while talking up “voluntary measures” to keep more diesel at home, according to Global Energy Flow’s tracking of the coverage. Until there is an actual order, nobody outside the administration knows what is on the table.
Oxford Economics looked at what a ban would do. “A ban would temporarily lower prices, but short-term relief would be uneven geographically,” the firm said. “Price declines would be concentrated in the Gulf Coast and Midwest, where most refining capacity is located. Distillate shortages are concentrated in the Northeast and West Coast, and these regions would see little benefit from an export ban.”
The part of the country that has the refineries would get a short break, while New England homes that heat with oil and West Coast truckers paying the highest prices in America would get almost nothing. Energy experts told CBS a ban could eventually backfire by making the global shortage worse, which would push prices back up. On September 18 we warned that governments protecting their own supplies is how an expensive global market turns into regional shortages, and a U.S. export ban on top of Russia’s would be exactly that.