Diesel prices have doubled in a year, and it’s driving up the price of almost everything you buy

Like many businesses, Dietz and Watson Inc., a Philadelphia-based family-owned deli meat and cheese maker, faced rising costs and supply chain challenges last year, including bird flu outbreak This has led to a sharp drop in the supply of poultry meat.

But there is one common thread linking the rising costs of raw materials and products at Dietz & Watson’s Tacony manufacturing plant: soaring energy prices, Especially the cost of diesel fuel, which is the workhorse of fossil fuels.

Diesel powers farmers’ tractors and processors’ trucks that produce raw materials for deli foods, as well as a fleet of 100 Dietz & Watsons that deliver food to stores.

Energy prices rose across the board last year, but diesel prices have risen since Russia invaded Ukraine Accelerates much faster than gasoline prices, Create jaw-dropping numbers Posted outside gas stations in the area, causing anxiety among owners of diesel equipment. The price of diesel affects just about everything – every builder, every miner, every landscaper, every cargo transporter depends on diesel fuel.

In southeastern Pennsylvania, a gallon of diesel cost about 11.5 percent more than a gallon of regular gasoline in January, according to the AAA, less than the 18 percent average spread between the two prices over the past five years. But last week, diesel prices in the region rose to $6.50 a gallon, 33 percent above the average gasoline price of $4.89.

Diesel used to be much more expensive than gasoline – in the winter of 2018-19, 2015 and 2008, diesel was more than 50% more expensive than gasoline at the time. But in 2008, gasoline prices plummeted after the market crashed. Both diesel and gasoline prices are now at record highs.

“Diesel costs more than $6, like $6.25 today,” said Cindy Eni Yingling, CFO of Dietz & Watson. “A year ago, they were $3.25.”

Hero’s brother said diesel costs had a big impact on Dietz and Watson, Luis Eni CEO of the company their grandfather founded in 1939.

“It’s going to be hard to calculate, but the cost of animal feed and the cost of diesel fuel to run tractors and deliver meat at the farm level are going up,” he said. “Energy costs for processing plants have gone up. Our logistics costs have gone up dramatically due to the cost of diesel fuel.”

Soaring diesel prices pose such a serious political dilemma for a Biden administration that last week it raised release fuel rarely used Northeast Home Heating Oil Reserve Offer some price concessions – heating oil is practically the same as diesel.

But the reserves of heating oil are small—it contains only 1 million barrels of fuel, about a day’s supply in the Northeast. Most energy experts said the release would not have a major impact on the market.

A small business owners association said higher diesel costs would inevitably be passed on to consumers in the form of higher prices.

“The rise in diesel is weighing on our members’ transportation costs,” said Greg Moreland, director of the Pennsylvania Federation of Independent Business. “At every stage of transportation, if you can get the goods you need, costs increase. When businesses incur costs, they pass those costs on to customers, perpetuating the high inflation we’re seeing now.”

In fact, Eni has seen signs that consumers are tightening their belts when it comes to Dietz & Watson products in response to rising prices and reduced disposable income.

“We can see numbers, visits per store are going down, people are looking at what they’re spending at the grocery store,” he said. “In the past, families bought a pound of this, a pound of that and a pound of cheese. Maybe they’ve cut it down to half a pound or three-quarters of a pound. We’ve seen sales drop all the time.”

Rising energy costs are a topic of political accusation — some accusing oil and gas producers of holding back production, while others accusing policymakers of holding back production with anti-fossil fuel rhetoric.

It is indisputable that energy markets have become unbalanced during the coronavirus pandemic, causing global consumption to plummet, prices to fall, and production to shrink. Consumption, prices and production all rebounded as the global economy rebounded, but demand outstripped supply.

The invasion of Ukraine by Russia, one of the world’s largest oil and gas producers, has further disrupted global markets, especially in Europe, which relies on Russian fossil fuels. European light-duty vehicles, including cars, use more diesel than American fleets. Demand for diesel has also surged in Europe, as generators use it to replace soaring prices for Russian gas.

Greater European demand for diesel to replace Russian fuels has played a major role in pushing up diesel costs in the U.S. The biggest impact is on Northeast markets, which have become more reliant on imported fuels after roughly half of the region’s refineries closed in the past decade, including the closure of the largest refinery in the Northeast in 2019, Philadelphia Energy Solutions.

PES production accounts for about 100,000 barrels per day of “distillates,” a category that includes diesel. These fuels are replaced by imports, According to the U.S. Energy Information Administration (EIA)But distillate imports at East Coast ports have fallen to 76,000 bpd over the past seven weeks, from an average of 227,000 bpd last year, according to the EIA.

Denver energy economist Philip Verleger said that in the current market environment, unless regulations that control production are loosened or an economic slowdown reduces demand, diesel could be in short supply for months or years. “In the near term, distillate prices may continue to rise compared to other petroleum products,” Verleger wrote in a recent paper.

U.S. refiners are now going all out to meet demand for diesel and jet fuel, said Tom Kloza, head of global energy analysis at Oil Price Information Services. Fuel makers that lost money during the pandemic lockdown two years ago are now enjoying huge profits on the fuel they produce, which cost $100 a barrel, or nearly double, the net cost of crude oil.

“These are epic, epic numbers,” Kloza said. “I mean, the world’s refiners never thought they could make $100 a barrel on any given day by making diesel.” Monroe Energy in Trainer has lost most of the 10 years since the Delta Air Lines acquisition time, but now earning so much, Kloza said, “they might as well have a counterfeiting machine out there.”

There seems to be no end in sight. Diesel inventories are around 103 million barrels, compared with normal storage of around 220 million barrels, he said. U.S. diesel exports to Latin America and Europe hit a record high of 1.5 million barrels per day.

Some large corporate and institutional fleet owners have mitigated the impact of soaring diesel prices by hedging fuel purchases in the futures market, as principals NJ Transit recently told New Jersey lawmakers.

A. West Chester motor freight company Duie Pyle was able to pass on diesel price increases to its customers through a fuel surcharge, which has become a standard clause in shipping industry contracts after several wild price swings. Peter Latta, chief executive of A. Duie Pyle, said the surcharge was based on a weekly adjusted local government fuel price index. This virtually eliminates the risk of injury to carriers from rising fuel prices.

More worryingly, diesel will become increasingly difficult to source regardless of price. A. Duie Pyle’s fleet consumes 61,000 gallons of diesel a day, and Latta is concerned about reports that the country’s current diesel supply is at a 30-year low. The company ensures a steady supply of tanker deliveries to replenish its 508,000-gallon storage tanks.

“We’ve been keeping our tanks full in West Chester, not as a price hedge, but as a supply hedge,” Latta said.