There’s no doubt the price of gas has skyrocketed over the last year. That includes diesel fuel, which is seeing record prices.
At roughly half a dozen stations in California, diesel prices are sitting at $9.99 — as high as they can go on the station signs. However, that may not necessarily mean people are paying that price.
“I had a few moments and made contact with a couple stations,” Patrick De Haan, head of petroleum analysis at GasBuddy, told Straight Arrow. “The stations did say their sign said $9.99, but they had done that because they had run out of diesel.”
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So while truckers might not be paying that much if a station’s just out of fuel, the actual prices aren’t far off.
Expensive diesel
While most of those stations use that as a signal that they’ve run out, De Haan said at least one of them showed a transaction.
“One appears that it does have fuel,” De Haan said.
Driving by a gas station that says $9.99 for diesel may come as a shock to some, but frankly, it’s not that far off from average prices.
The national average for a gallon of diesel is $6.00.That number jumps to $7.91 in the Golden State. That is $2.75 higher than one year ago.
“It probably will surpass $8,” De Haan said. “It could get to $8.25. We’re seeing a lot of stations above $9 already. In fact, my list of top and bottom 15 prices in California for diesel, the most expensive 15 all start with a nine already.”
The most recent numbers show roughly 3.5 billion gallons of diesel fuel is sold in one year in California. That’s $31.5 billion if it reaches $9 per gallon, also known as more than the GDP of Albania.
Diesel is also the second most commonly purchased fuel in California and uses more diesel than any other state in the country.
Why?
Stations running out of diesel illustrates the problem here.
“The bulk of the problem remains that diesel is in shorter supply,” De Haan said.
Much of that is due to what’s going on around the world. Between the war in Iran and the war between Russia and Ukraine, supply keeps shrinking, and prices keep rising.
Billions of barrels of diesel typically go through the Strait of Hormuz each year, but that number has fallen drastically while the strait remains a dangerous place in the Iran War.
Another issue with this pricing is the time of year, especially in California.
“Seasonal diesel prices tend to go up also into the fall and winter because agriculture season is around the corner in California and elsewhere,” De Haan said. “Because diesel is also essentially the same as home heating oil, Americans in rural locations that don’t have natural gas start filling up with either propane or heating oil. Demand for heating oil and diesel go up.”
Another issue, and a common problem in California, is the tax rate.
California’s sales tax on diesel fuel is 13%, the highest in the nation.
What goes up might come down, but probably won’t
“There’s not much relief in sight,” De Haan said.
President Donald Trump recently said he expects prices to come down after the midterm elections.
He also said that’s partly because the war with Iran will end immediately after the elections. However, he’s been claiming that since baseball’s Spring Training started and the playoffs start in three weeks.
“I’m not on the same train there,” De Haan said. “There’s not really any catalyst, whether it’s tomorrow, in a week, in a month, or in a year, that at this point looks like there’s any real guaranteed savings yet.”
De Haan did say once these geopolitical issues do end, “there will likely be plenty of downward room for prices to fall.”
However, at this point there’s no clear end to the war with Iran, and the Russia/Ukraine war has dragged on for years.
So, what should you do if you’re in the market for diesel?
“Shop around,” De Haan said. “There are huge variances in prices within California, probably on the magnitude of $2-2.50 a gallon. So just a lot of volatility. Shop around.”
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