As U.S. diesel fuel prices soar to all-time highs, some California gas pumps literally can’t price their diesel any higher – the top price is $9,999 per gallon.
Fuel tracking company GasBuddy reported Thursday that a small handful of California gas stations increased their retail diesel to the maximum price as the state’s overall diesel average reached $7.91 per gallon.
GasBuddy said it confirmed the $9,999 price was posted at gas pumps in the San Diego suburb of Serra Mesa on Wednesday and that it was investigating reports elsewhere. Patrick De Haan, head of petroleum analysis at GasBuddy, warned that some pumps could simply run out of fuel. He pointed out that it is common practice at some gas stations to post “US$9,999” to alert motorists when they are temporarily running low on diesel.
What is clear, however, is that prices at several gas stations in California are well over $9 per gallon.
Nationally, the U.S. average for diesel topped $6 a gallon this week for the first time ever. De Haan said the national diesel average could realistically rise to $7 per gallon in the coming weeks. “There’s really no sign of improvement,” he said Assets. “There are further signs of escalation. We are on the wrong track.”
De Haan said the initial $9,999 reports gave him “goosebumps” – for the first time ever it was a realistic pricing option.
De Haan said further clarification is needed on whether gas stations could be legally allowed to adjust digital software and move the decimal to charge more than $10 per gallon, or instead start charging by the half-gallon or other measurement.
The California news comes as Crude oil and fuel prices continue to rise worldwide amid military escalations in the Middle East and the renewed effective closure of the Strait of Hormuz bottleneck. While diesel prices are reaching record highs in the US, the situation is even worse in the rest of the world, where fuel shortages are expected, prices are higher and inflationary pressures are increasing on everything from food to other goods and services.
The global oil benchmark rose nearly 8% from $101 a barrel to $109 on September 10, its highest level since May. The average price of a gallon of regular unleaded gasoline in the U.S. was $4.27 as of September 10 and is expected to continue to rise. This is the highest September price ever.
View of the Middle East
OPEC, for example, reported that Middle East energy leader Saudi Arabia’s oil production fell to 6.2 million barrels a day in August, its lowest level since 1990 – down from pre-war levels of 10 million barrels a day – as Yemeni Houthi attacks hit output in the Red Sea seaaccording to OPEC statistics. The Houthi attacks escalated again this week, targeting, among other things, important Saudi oil pipelines. And more tankers are being attacked in the Strait of Hormuz.
But while oil continues to be withdrawn from strategic reserves around the world – U.S. strategic petroleum reserves have fallen to their lowest level in 44 years – there are no such reserves for fuels, particularly diesel, which powers the global economy for trucking fleets and more. The timing is particularly bad for the agricultural sector, which relies heavily on diesel and whose harvest season typically begins in September.
“It will trickle down [inflationary] supply chain in the coming weeks,” said De Haan.
The highest gasoline and diesel prices are costing Americans a total of over $700 million more per day compared to last year. De Haan said he wouldn’t be surprised if the impact rose to $1 billion a day. Gasoline prices are painful, he said, “but diesel is really going to be the troublesome child.”
President Donald Trump said this week he was resigned that the Iran war would last at least until November, although he argued it would be resolved shortly after the midterm elections.
Short of a peaceful ceasefire in the Strait of Hormuz, the only solution is for prices to rise more sharply to force further “demand destruction” of oil and fuels, said Susan Bell, senior vice president at research firm Rystad Energy. “I hate to say it, but we need higher prices at the pump to encourage consumers to make decisions about their energy use. We need more (global) savings,” Bell said Assets.
Everyone is focused on oil prices rising above $100 a barrel, but diesel costs are much more worrisome right now, said oil forecaster Dan Pickering, founder of consulting and research firm Pickering Energy Partners.
“The [global] The market is competing for a limited diesel supply. So at what point do we start to worry? We’re worried now,” Pickering said Assets. “The prices are quite high and there is no easy pressure relief valve. Nobody is building new oil refineries.”