Diesel Prices Up Because Of Supply-Demand Pinch

Why are diesel prices high? Diesel prices are elevated this year for a couple of reasons. One is that there are still lingering impacts from the COVID-19 shutdowns that limit supply. Second is that demand is high for fuel. This puts a pinch on diesel, raising prices, according to Jason Schwantz, vice president of energy sales and marketing at CHS.

“After COVID, we took out about 1 million barrels of refining capacity,” he says. “So we’re producing less, but we’re using about the same amount that we were before. We were low on diesel fuel in the country before.”

Several plants closed during COVID, and they haven’t opened back up because they were dilapidated anyway. The Ukraine-Russia War has also caused diesel prices to elevate in Europe, raising the need for U.S. fuel for export.

Meanwhile, the push for electric vehicles and high interest rates have brought hesitancy to the industry for opening new refineries. In addition, refining delays happen due to labor strains and some lingering supply chain problems for machinery parts.

Schwantz advises that if you can hold off until December/January to refill your fuel tanks for spring, that’s likely when we’ll see another demand lull where prices will ease off. Despite prices being higher, there’s still seasonality for you to take advantage of.

He says even if you don’t buy diesel at the pump, the high prices impact everyone because the products and services we rely on are fueled by diesel. Schwantz says the pinch in the fuel supply chain could keep inflation high for that reason.