The price of diesel it has become one of the main sources of pressure on the world economy, its rising price is increasing the costs of transporting goods, agriculture, and numerous industrial activities that depend directly on this fuel.
Moreover, the pressure does not come solely from crude oil, the availability of refined products has decreased, while diesel refining margins have reached exceptionally high levels in several markets.
This difference is especially relevant because diesel fuels a large part of the global physical economy. Trucks, ships, agricultural machinery, and construction equipment depend on middle distillates, when their price rises steadily, the impact can quickly ripple through the supply chain, ultimately affecting the costs faced by businesses and consumers.
The price of diesel is diverging from that of crude oil
One of the most significant changes appears in the difference between the value of oil and the product once refined, according to data collected by AGBI, Brent was around $108 per barrel, while the refining differential for diesel had reached about $106.
Using that reference, the implicit cost of refined diesel would be around $214 per barrel, the magnitude of this difference shows that the current tension is not only focused on the raw material, but also on the capacity to transform it and maintain sufficient fuel available on the market.
ABC Color also points out that around five million barrels per day of global refining capacity are out of service, the media outlet links this situation to disruptions in energy routes, attacks on Russian facilities, and seasonal maintenance work in North America. The result is a much tighter market for refined products, with less room to absorb additional supply disruptions.
Lower diesel supply increases refining margins
Furthermore, the international availability of diesel and gas oil has also decreased, adding pressure on a market already facing processing capacity limitations. Data collected by El Boletín indicates that net exports of diesel and gas oil from the Gulf and Russia were 1.6 million barrels per day below the levels recorded in February.
At the same time, refineries processed 4.2 million fewer barrels per day than a year earlier, according to figures from the International Energy Agency cited by that publication, the combination of lower processing, reduced inventories, and export restrictions has boosted refining margins, the effect is particularly noticeable in middle distillates, whose availability is essential to keeping much of the land and sea transport operational.
Transport and agriculture are impacted by diesel
Meanwhile, rising fuel costs are beginning to affect different links in the supply chain, trucks consume large quantities of diesel to transport food, raw materials, and industrial products. When fuel costs increase, transport companies must absorb higher operating expenses, and some of that pressure can ultimately be passed on to logistics rates.
The impact also extends to agriculture, tractors, harvesters, and numerous other agricultural machines run on diesel. In addition to this direct consumption, there are the costs associated with transporting fertilizers, seeds, raw materials, and finished products.
ABC Color reports that US farmers spent an additional $1.4 billion on diesel during the planting season compared to the previous year, it also cites forecasts from the US Department of Agriculture indicating higher costs for both fuel and fertilizers. In this way, energy pressure can be passed on from the pump to food prices, passing through various stages of production, transportation, and distribution.
The rise in diesel prices is spreading across several countries
The price increase also has an international reach, and its effects can already be seen in various markets, according to comparative data published by El Boletín on September 14, Germany registered a price close to €2.44 per liter, with a year-on-year increase of 54.4%. France was at around €2.31 and Italy at €2.23.
The United States showed a year-on-year increase of 67.7% under the reference used by the media, while Canada accumulated an increase of 66.2%. The differences between countries remain wide due to factors such as taxes, subsidies, regulation and dependence on imports; however, the data shows that the tension in the diesel market is not limited to a single economy, but extends across different regions.
Diesel prices increase inflationary pressure
Finally, the main economic risk appears when these higher energy costs begin to be passed on to the consumer. Diesel occupies a particular position within the economy because it is directly involved in the movement of goods and in numerous productive activities; its price increase can simultaneously raise the costs of transport, agriculture, construction, and distribution.
This dynamic adds pressure on inflation and poses an additional challenge when the immediate cause of the increase is related to supply and refining capacity constraints, factors that are not solely dependent on demand conditions. If the availability of middle distillates remains limited, diesel prices could remain high even if crude oil prices experience more moderate movements.
Therefore, the evolution of refineries, inventories and international flows of diesel will be crucial in measuring the pressure on prices during the coming months; diesel has thus become one of the key indicators to follow how tensions in the energy market are transmitted to transport, production and global inflation.
Source: Agbi
Photo: Shutterstock
