Diesel at 5-Year Highs: Why This Surge Isn’t a Blip

Diesel prices are near record highs, and this spike may have more staying power than 2008 or 2022. John Kingston breaks down what’s driving the run-up: refinery outages, Russian supply hits, maintenance season and heating oil demand. For fleets, brokers and shippers, the big issue isn’t just the headline price. It’s how long this lasts — and where fuel surcharges stop covering the pain, especially on empty miles. #DieselPrices #Trucking #FuelSurcharge

Ultra-low sulfur diesel futures on the CME settled Monday at what FreightWaves editor-at-large John Kingston called effectively the highest price on record — surpassing the 2008 spike and nearly matching a brief, short-covering-driven one-day peak that followed Russia’s invasion of Ukraine. The AAA daily diesel price sits roughly 12 to 13 cents below that post-invasion high. Kingston said, unlike previous spikes, this one has structural backing that could sustain elevated prices for months.

The heating oil spot price at New York Harbor — the benchmark middle-distillate contract — hit $4.72 per gallon, the highest level in five years, according to FreightWaves SONAR data cited during the interview. Kingston noted that the lone settlement price above that level was a single anomalous day at the end of April when the expiring May contract spiked above $5 before collapsing $1 the following session — a classic short-covering event with no real-world supply implications.

The core supply problem, Kingston explained, is the combined loss of refining capacity from Ukrainian drone strikes on Russian facilities and ongoing disruption at the Strait of Hormuz. “The Ukrainian attacks on Russian refineries have taken over 1 million barrels a day of refining capacity offline,” he said, noting that Russian refineries were specifically oriented toward diesel production given the heavier crude slate from Russian fields. Meanwhile, tanker tracking firms such as Kepler have publicly disputed optimistic U.S. government estimates of oil flows through the strait, and questions remain about how many tankers can return to reload.

“All commodities are dirt with diesel — meaning they’re produced from the earth one way or the other. Either you plant them and they grow, or you dig them out like ore, and you need diesel to do all of that.”

That phrase, which Kingston attributed to Jeffrey Currie, former head of commodities at Goldman Sachs, underscores why a sustained diesel shock carries broader economic consequences than a gasoline spike. Kingston argued that even if diesel’s absolute price does not break prior records, the cumulative cost to the economy — total daily consumption multiplied by price over six months starting March 1 — will likely exceed the toll from the 2008 and 2022 spikes combined.

For carriers, the pain is unevenly distributed. Truckload carriers can push most fuel costs to shippers via fuel surcharges, but Kingston pointed out that empty and backhaul miles — often running at 12% to 13% of total miles for truckload fleets — carry no surcharge recovery. He predicted that some carriers will begin disclosing diesel-related earnings pressure this quarter. The East Coast and Northeast are particularly exposed: EIA weekly inventory data released Tuesday showed regional diesel stocks at levels Kingston described as almost unimaginable to market participants even a short time ago.

California diesel has breached $7 per gallon on the DOE regional price, while the lower Atlantic region sits around $5.43, but Kingston said the percentage increase in California has not materially outpaced the rest of the country — the state was simply already higher due to taxes and clean-fuel mandates including the Low Carbon Fuel Standard. On the crack spread between diesel and crude, Kingston said a 100% spread is territory no one in the market can recall ever seeing. “This higher market has legs,” he said. “You can imagine it running for months because you’re still not at normal supplies — and on top of that, down the road, you’re going to have to rebuild inventories.”

• Ultra-low sulfur diesel on the CME hit its highest post-war settlement price, with the AAA pump price roughly 12–13 cents below the post-Ukraine-invasion record.
• Ukrainian strikes on Russian refineries have removed more than 1 million barrels per day of refining capacity, and seasonal maintenance shutdowns will further tighten supply.
• Diesel-to-crude crack spreads have reached levels never previously recorded, and East Coast/Northeast diesel inventories have fallen to historically low levels.

This Summary is generated thanks to a transcription of the interview, for the full interview please enjoy the video above.