Diesel Above $5 For The First Time Since 2022: Goldman Warns The Real Energy Crisis Isn't Crude
Since the start of the war in Iran, investors have focused almost exclusively on crude oil benchmarks.
Yet the most important shock in energy markets may be happening elsewhere — in refined fuels like diesel, where prices and refining margins are now rising far faster than crude.
The national average price of diesel crossed $5.044 per gallon on Tuesday, according to American Automobile Association — the first time it has breached that level since the post-Ukraine energy shock of 2022.
Three states are already above $6: California at $6.49, Washington at $6.11, and Hawaii at $6.01.
The surge reflects a powerful rally in wholesale diesel markets. NY Harbor ultra-low sulfur diesel (ULSD) futures climbed to $3.80 per gallon on Tuesday — marking a 46% surge since the start of the Middle East supply disruption.
Converted into oil market terms, that price implies roughly $159.60 per barrel of diesel.
That's nearly $64 above crude WTI prices, creating one of the widest refining margins since the last global energy crisis.
Chart: Oil WTI vs. ULSD Futures – Performance Since The Start Of The War In Iran
Why Refined Products Are Getting Hit Harder Than Crude
Diesel prices are rising primarily because disruptions in Middle East oil flows and refinery outages are restricting the global supply of middle distillates — the category of fuels that includes diesel and jet fuel.
In other words, the constraint is not crude oil production alone.
It's the ability to refine crude into usable fuels.
"The war in the Middle East is an even larger shock for refined products than crude," Goldman Sachs analysts, including Yulia Zhestkova Grigsby, said in a note this week.
The report notes that Singapore and Northwest Europe jet fuel prices set all-time highs above $200 per barrel last week.
This is happening because of three major channels.
- The Persian Gulf normally exports about 3.3 million barrels per day of refined products, roughly 13% of global flows. Most shipments pass through the Strait of Hormuz, creating a major chokepoint for diesel and jet fuel exports.
- Goldman estimates 2.2 million barrels per day of refinery outages in the Middle East, while the International Energy Agency says more than 4 million barrels per day of capacity is currently at risk. These outages directly reduce the production of middle distillates such as diesel and jet fuel.
- Medium and heavy crude — the types best suited to produce diesel and fuel oil — are becoming scarce. Global exports of medium and heavy crude have fallen 5 million barrels per day year-to-date, while light crude exports have increased by 1.7 million barrels per day. That imbalance limits refinery output of diesel and jet fuel.
Freight Costs Are Adding Fuel To The Rally
Transportation costs are also pushing refined product prices higher.
Clean tanker freight rates have risen by $3.4 per barrel year-to-date, a 70% increase, boosting refining margins and further tightening supply.
At the same time, some Asian refiners have already started trimming throughput due to crude shortages, with early estimates showing 300,000 barrels per day of reduced processing last week and potentially 700,000 barrels per day of additional losses in March.
Stocks Benefiting From Higher Diesel Prices
Rising diesel prices and widening crack spreads are translating directly into stronger earnings prospects for U.S. refiners.
The VanEck Oil Refiners ETF (NYSE:CRAK) — a basket tracking global refining companies — has climbed for 11 consecutive weeks, the longest winning streak since the fund launched.
Since the start of the conflict, the ETF has gained more than 8%, outperforming the broader market as the SPDR S&P 500 ETF Trust (NYSE:SPY) slipped about 2%.
Among the most direct beneficiaries of rising crack spreads are Marathon Petroleum Corp. (NYSE:MPC), Valero Energy Corp. (NYSE:VLO), PBF Energy Inc. (NYSE:PBF), Phillips 66 (NYSE:PSX), and HF Sinclair Corp. (NYSE:DINO).
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