What is the deal with diesel?
Analysts say the fuel market is in a “perfect storm,” as a potential rail strike, the war in Ukraine, the drought that has slowed Mississippi River barge traffic, escalating energy needs in the winter, the war in Ukraine (again) and tight diesel inventories in the Northeast have pushed the market higher.
For fresh produce, the upward pressure on diesel prices adds more inflationary fuel to the fire. Growers have to pay more for the diesel they use on the farm and retailers have to pay more to have fruits and vegetables transported across the country to their distribution centers and their stores.
Studies estimate fresh produce travels over 1,500 miles before being consumed, according to the National Center for Appropriate Technology’s website.
Higher energy costs mean that consumers are paying more for trips to the supermarket and a dozen other related costs. The Bureau of Labor Statistics reported in September that consumer prices for energy were up 20% compared with a year ago.
For background on diesel and energy issues, here are a few links:
The International Energy Agency’s Oil Market Report
Gist: A worsening economic outlook in 2023 could help stem the rise of energy markets, the report said, but that is no bargain. Higher prices could spur oil production from non-OPEC countries and more biofuel from the farm, but that will take time.
Short-term Energy Outlook from the U.S. Energy Information Administration
From the report: “U.S. retail gasoline prices in our forecast average $3.80 per gallon (gal.) in 4Q22 and $3.57/gal. in 2023. Retail diesel prices average $4.86/gal. in 4Q22 and $4.29/gal. in 2023.”
CNBC Coverage: The diesel market is in a “perfect storm”
Nugget: One of the sources quoted in the Oct. 31 story said the price per gallon of diesel may rise 15 to 20 cents per gallon in the next few weeks.
Obviously, the war in Ukraine is a huge drag on the world’s economy. We can hope that Russia’s leaders realize that it cannot now win the war, and both countries find terms to end the conflict. But as some analysts point out, that would simply mean that Putin would be exiled or killed. That is not a compelling option for the Kremlin now.
Per gallon diesel prices since the pandemic reached a low of $2.37 in November 2020. Prices now are more than double that. Even with a slowing economy because of the Fed’s interest rate hikes, the trouble light on the dashboard continues to blink for diesel.
