The price of diesel is spiraling out of control.
According to the American Automobile Association (AAA), the national average price for a gallon of diesel is $5.189, up from $3.495 the same time a year ago.
Plus, the spread between gasoline and diesel has never been higher: $1.27.
The problem? Inventories are cratering ahead of Old Man Winter’s impending arrival. The U.S. Energy Information Administration (EIA) has recorded three consecutive weeks of enormous drawdowns, totaling around 11 million barrels.
“The most disturbing part of the (EIA) report is that distilling inventories are so far below average. Winter is coming,” said Phil Flynn, an analyst at Price Futures Group in Chicago. “The market is looking at the big picture, as opposed to the short-term demand numbers that were impacted by the storm.”
Indeed, many reports show that U.S. households will be spending more this year to heat their homes, with some estimates north of 30 percent.
President Joe Biden is scheduled to speak about gasoline prices next week. In the meantime, his administration is urging domestic oil refiners to limit their exports of fuels and that the White House may need to take action if these firms do not construct enough inventories.
Brace yourselves. Winter is coming.
The latest weather models suggest that the U.S. northeast and midwest could start experiencing a cold snap later this month, which would accelerate heating demand.
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