For more clear and insightful business and economic news, subscribe to the Daily Upside newsletter. It’s completely free and we guarantee you’ll learn something new every day.
And you thought about stuffing your gas tank was expensive.
Refineries around the world are struggling to produce enough fuels such as diesel and heating oil, leaving inventories unusually low — and prices undesirably high — for this time of year, Bloomberg reported.
Last week, oil prices in London were almost $95 a barrel, but in the United States diesel prices rose above $140, the highest ever for this time of year, according to Bloomberg.
Much of the price increase can be attributed to OPEC+ countries Saudi Arabia and Russia announcing earlier this month that they would extend their crude oil production cuts until at least the end of the year. That’s 1.3 million barrels less crude oil every day:
- In addition to cuts in Saudi Arabia and Russia, intense heat waves in the Northern Hemisphere this summer caused many factories to run at a slower pace, and the pandemic shuttered less efficient refineries around the world as demand fell.
- The cuts are putting pressure on sectors such as aviation, freight and shipping – sectors that rely on aviation fuel, diesel and heavy fuel oil.
The Buck doesn’t stop there: Of course, the higher costs of moving ships, planes and trucks are not simply absorbed by suppliers, making the fight against global inflation even tougher. “Diesel is the fuel in the 18-wheel truck that carries products from the factory to the market, so when prices rise, those higher transportation costs are passed on to businesses and consumers,” Clay Seigle of Rapidan Energy Group told Bloomberg.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.