Dive Brief:
- President Joe Biden ended Russian oil, diesel and other energy imports into the United States on Tuesday, saying he was stepping up economic sanctions on Russian President Vladimir Putin and his administration for the invasion of Ukraine.
- In 2021, the U.S. imported an average of 209,000 barrels per day of crude oil and 500,000 per day of other petroleum products from Russia, according to the American Fuel and Petrochemical Manufacturers. That supply will now likely have to come from internal sources or from nations such as Canada or Mexico.
- While diesel prices were already spiking, the sanctions will bring even higher record costs, according to Tom Kloza, a founder of the Oil Price Information Service, who tweeted: "All-time high record (diesel) pump price of $4.8448 per gallon ... gets breached tomorrow and $5 (per gallon) national average is in sight."
Dive Insight:
While announcing the latest sanctions, Biden acknowledged the ripple effects it would have on the United States, saying, "This is a step that we're taking to inflict further pain on Putin, but there will be cost as well here in the United States."
The United States is already feeling the pain. Diesel was up 74.5 cents per gallon for the week ended March 7 compared to the previous week, according to the Energy Information Administration. On Monday, that price was $4.849 per gallon, up 54% from the comparable week in 2021.
For the nation's truck fleets, it has been the worst pain at the pumps since July 2008, when oil hit the $150 per barrel mark. That was when diesel hit its long-held record pump price of $4.8448, according to Kloza.
Diesel is once again the power mover in US markets. All-time high record pump price of $4.8448 gal (7/17/08) gets breached tomorrow and $5 gal national average is in sight. California is targeting $6 gal by the weekend.
— Tom Kloza (@TomKloza) March 8, 2022
The higher pump prices will likely cause fleets to scramble to make sure any empty miles are filled with freight on the backhaul, and a new emphasis on aerodynamic tools, such as wheel covers, could be in the future. Fuel prices usually rise as weather in North America gets warmer, so prices are likely not done with the roller-coaster yet.
But consumer reaction could dramatically change everything. Experts have been wondering when "demand destruction" for gasoline and diesel could arrive when prices are so high. High fuel prices also mean consumers start buying less, affecting the need for freight hauling.
Dan Pickering, chief investment officer of Pickering Energy Partners, tweeted that he thinks such demand dips are currently in play.
"Demand destruction is happening now in my opinion," Pickering said.
Filled up today - 3 pumps surveyed - $10, $15 and $86.23 guess which one was from the Audi SUV? Demand destruction is happening now in my opinion. pic.twitter.com/jlrv0BHRsY
— Dan Pickering (@pickeringenergy) March 7, 2022
