(Bloomberg) -- U.S. farmers and truckers are paying the highest price for diesel in nine years after oil soared above $100 a barrel amid intensifying sanctions against Russia.
The average retail diesel price rose to $4.016 per gallon on Tuesday, the highest level since late March 2013, according to auto club AAA. Ultra-low sulfur diesel futures traded in NewYork, meanwhile, hit a fresh eight-year high of $3.2008 on Tuesday. That's a bad omen for consumers because pump prices typically track the futures within a few weeks.
Farmers operating diesel-powered machinery are expected to burn lots more of the fuel as they plant the largest combined corn, soy and wheat crops since 2014. Highway truckers are racking up more miles than they did prior to the pandemic, adding to the strain on supplies.
Soaring diesel prices are bad news for U.S. President Joe Biden, who has prioritized capping domestic fuel prices by avoiding direct sanctions on Russian energy exports. Yet oil is surging and so is inflation.
The strain on U.S. diesel markets may worsen if Europe turns to Gulf Coast refiners to replace Russian supplies under threat from shipping disruptions as well as financial sanctions. A tightening diesel market could pose a bigger challenge for Europe than a squeeze on crude, said David Wech, chief economist at trading and shipping researcher Vortexa Ltd.
U.S. diesel stockpiles are already at the lowest absolute level since late 2019 and an eight-year low on a seasonal basis.
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