The Next Gasoline Squeeze Is About to Happen Because of the Diesel Crisis

BY SRH

Goldman Sachs commodity experts Yulia Zhestkova Grigsby and Daan Struyven warned in a Wednesday note that the global diesel crisis is tightening gasoline supplies as refiners prioritize higher-margin diesel production. This shift raises the risk of further gasoline price increases ahead of the US midterm elections. The US national average diesel price has already reached a record $6.40 a gallon, adding to household and business fuel costs.

“The key reason for this new recommendation is that refiners’ switching output from gasoline to diesel is rapidly tightening gasoline markets, where less elevated price levels leave room for sharp price upside if the Mideast and Russia-Ukraine conflicts continued to constrain refining output for longer or if more energy infrastructure were damaged,” the analysts wrote.

In the note titled “High Diesel Prices Cause High Gasoline Prices,” the analysts recommended that clients buy European gasoline for June 2027 delivery, saying that there’s more upside to the rally if wars in the Middle East and Ukraine continue disrupting supplies. They added that they closed a European diesel spread recommendation with a potential gain of 45%, saying diesel already incorporates a substantial premium for further disruptions.

Supply Troubles: Global Diesel & Gasoline Exports Tumbled

The latest update from AAA shows US diesel prices stand at $6.40 a gallon, while gasoline prices are around $4.44 a gallon.

In commodities this morning, gold fell about a percent as higher policy rates in the US weighed on non-yielding assets. Brent crude futures fell about 2% to $103 a barrel after Saudi Arabia signaled additional capacity restoration, helping ease supply concerns. Global bond markets rallied slightly, with the 10-year US Treasury yield falling to 4.98%. Source: ZeroHedge