The diesel crack spread is the number behind a strange month at the pump. U.S. diesel has climbed above $6.50 a gallon, a record. But crude oil, the raw material diesel is made from, sits in the low $90s a barrel. The last time diesel set a record, in June 2022, crude was above $110. The input got cheaper. The product got more expensive. Something in the middle is broken.
That middle is the refinery.
A refinery buys crude, heats it, and splits it into gasoline, diesel, jet fuel and other products. The crack spread is the gap between what a barrel of crude costs and what the finished fuel sells for. Think of it as the refinery’s paycheck. For diesel, that gap usually runs about $15 to $30 a barrel. On Sept. 1 it passed $106, the highest on record. After Trump rejected Iran’s latest proposal over the weekend, it went back above $100.
So the diesel crack spread tells you where the shortage really is. The world is not running out of crude. It is running out of places to turn crude into diesel.
Two big suppliers went missing at the same time. Refineries in the Persian Gulf have been attacked or cut off since the Iran war began in February. In Russia, Ukrainian drone strikes on refineries forced Moscow to cut diesel exports. Buyers turned to the U.S. American refineries are already running close to full, and their diesel exports hit a record this summer. The result: U.S. stocks of diesel and heating oil sit about 12% below their five-year average, just as harvest season and heating season arrive.
Now every government wants to keep its diesel at home.
Washington. On Sept. 22, Trump said he had called for halting diesel exports, and Treasury Secretary Scott Bessent said the White House was studying whether a full or partial ban could work. A day later, officials walked it back.
Seoul. South Korea, a major diesel exporter, has capped fuel exports since March 13 at last year’s monthly volumes, so its refiners can’t chase higher prices abroad.
Beijing. China stopped refined fuel exports in March and loosened the rules over the summer. On Sept. 25, the White House fact sheet from Xi Jinping’s state visit said Trump urged Xi to produce more refined petroleum products. Look at the word: refined. Not crude.
Here is the catch with a U.S. ban. Diesel and gasoline come out of the same barrel. A refinery can’t make only diesel. If selling diesel abroad gets harder, refiners have less reason to run at full speed, and that cuts gasoline and jet fuel too. That’s why Trump’s own energy secretary, Chris Wright, said a blunt export ban “definitely doesn’t work.”
A ban also wouldn’t build a single new refinery. It would only move the shortage from one country’s pump to another’s. And when the global diesel crack spread is above $100, everyone is short of the same thing.
For investors, this changes what to watch. Crude gets the headlines. But when the problem sits inside the refinery, crude can fall while fuel keeps rising. That matters for inflation too, because diesel moves trucks, tractors and trains, and so it leaks into the price of almost everything. Earlier I wrote about how oil pushed up an inflation report. This time, the refining step is doing the pushing.
My take: The shortage isn’t underground. It’s in the refinery.
Not advice. Just how I see it.