Diesel Skyrockets 74.5¢ in One Week to All-Time Record High

Gas prices are displayed at gas stations in Englewood, N.J., March 7. (Seth Wenig/Associated Press)

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With the price of a gallon of diesel already sitting at a record high, President Joe Biden on March 8 announced that the United States would ban imports of oil from Russia, putting increased economic pressure on Russian President Vladimir Putin as he wages war on neighboring Ukraine, and setting the stage for further escalation in energy costs for the U.S. transportation sector.

Biden’s announcement followed the March 7 news that the price of diesel had risen an unprecedented 74.5 cents to a record $4.849 a gallon, according to the Energy Information Administration. Diesel’s previous high was $4.764 a gallon in July 2008.

On-Highway Diesel Fuel Prices

EIA.gov

The price of crude also has been on a roller coaster. On March 8, industry benchmark West Texas Intermediate crude reached $128.11 a barrel on news of the Russian cutoff, but fell the next day to $108.70 as OPEC+ members Saudi Arabia and the United Arab Emirates indicated they may loosen production caps to increase supply. However, other cartel members are struggling to meet existing production quotas because of what the International Energy Agency said is infrastructure underinvestment in the past few years.

“The United States is targeting the main artery of Russia’s economy,” Biden said from the White House. “We’re banning all imports of Russian oil and gas and energy. Russian oil will no longer be acceptable at U.S. ports and the American people will deal another blow to Putin’s war machine.”

Biden said his administration is working to immediately expand domestic oil production, and announced the U.S. is releasing additional petroleum from the Strategic Petroleum Reserve to ease supplies.

Still, Biden noted U.S. drivers will feel some effects.

“This is a step that we’re taking to inflict further pain on Putin, but there will be costs as well here in the United States,” Biden said. “I said I would level with the American people from the beginning, and when I first spoke to this, I said defending freedom is going to cost us as well in the United States.”

Prices at a gas station in Leonia, N.J., March 7. (Seth Wenig/Associated Press)

The price of diesel remains highest in California, averaging $5.759 a gallon. The largest increase, 85 cents, was seen in the Lower Atlantic, where it now costs $4.919 a gallon.

“The pressure was growing on the administration, even though they did not want to do that, because they know the record-breaking gasoline prices will look cheap in a couple of days,” Price Group Oil Analyst Phil Flynn said of Biden’s action. “This is definitely a good thing; most Americans realize that they don’t want to feed Putin’s war machine and most Americans will pay more at the pump to put a world of hurt on Putin. They want to send a message.”

Flynn predicted that gasoline and diesel prices could rise another 25 cents because of the White House embargo.

Costello

For the trucking industry, American Trucking Associations Chief Economist Bob Costello said fuel surcharges that some carriers have in place will ease some, but not all, of the sharp, sudden increase.

“Fleets generally have to pay for their fuel on the spot, but they don’t get reimbursed from the shippers for 30 days,” Costello said. “Some fleets may have to tap their lines of credit now to fill that gap. The trucking companies very much care about the price of fuel.”

So do consumers. According to EIA, gasoline’s increase of 49.4 cents per gallon pushed its national average price to $4.102 a gallon. That’s up nearly 50% from a year ago.

“Forget the $4-per-gallon mark. The nation will soon set new all-time record highs and we could push closer to a national average of $4.50,” GasBuddy analyst Patrick De Haan said. “Americans will be feeling the pain of the rise in prices for quite some time.”

Gasoline is even higher in Europe, averaging the equivalent of $7.21 per gallon. While Europe is highly dependent on Russian oil, the European Union said it will cut Russian imports by two-thirds this year.

Economist Rajeev Dhawan, director of the Economic Forecasting Center at Georgia State University in Atlanta, told Transport Topics that a steep economic downturn in Europe could have a broader global impact.

“If Europe goes into a recession — as it most likely will if this goes on for several more months — then it’s going to be felt by us,” Dhawan said. “We can handle $4 a gallon, but if it goes to $5 a gallon, the business model for trucking companies and others — it won’t work.”

In the U.S. last year, Russian energy products accounted for about 672,000 barrels of petroleum a day, or 8% of all oil and refined commodities.

American Trucking Associations said the Russian attack underscores why the U.S. must establish energy independence.

“The trucking industry calls on the president and Congress to take immediate, concrete steps to increase domestic production and restart critical pipeline projects in the face of this clear and present danger,” ATA President Chris Spear said.

The American Petroleum Institute said it is unwinding its relationship with Russia and supports the White House.

“We share the goal of reducing reliance on foreign energy sources and urge policymakers to advance American energy leadership and expand domestic production to counter Russia’s influence in global energy markets,” API President Mike Sommers said.