There’s already been two big price spikes this year due to the cost of diesel. Just wait till the next one hits
Biden overlooked diesel fuel inflation. Why that’s extra bad for the economy.
For the last six months, President Biden and his top advisors have obsessed over gasoline prices, for obvious reasons. That’s because no single price rattles consumers as much as the cost of gas, which crept up to a new record high of $5 per gallon in June. So it comes as no surprise that soaring gas prices corresponded directly with Biden’s sinking approval rating.
Since then, gas prices have fallen by about $1.10 per gallon. Biden may have helped a little by releasing oil from the US strategic reserve. Market forces, tough, have been a bigger factor. Still, that hasn’t stopped Biden from touting the drop in prices and claiming he deserves the credit.
But Biden has largely ignored another important type of fuel: diesel fuel, which is critical for the production and transportation of many everyday products. There’s a reason for Biden’s silence: Diesel prices remain uncomfortably high, and they’re contributing to food inflation and other consumer pain points. Around the same time gas hit $5, diesel hit a record high of $5.81 per gallon. Gas prices are now 22% below their peak, but diesel is just 8% lower. On a year-over-year basis, gas prices are up 15% while diesel is up 43%.
That plays a huge part in all your food and clothes and stuff, because diesel trucks deliver those goods. Autos are up $400-$1400 this year, much of it due to the price of diesel.
The American Farm Bureau Federation sent a letter to Biden on November 4 drawing attention to the problem. “Our nation’s food supply is driven by diesel,” Farm Bureau president Zippy Duvall wrote. “High diesel prices are severely impacting our farmers and ranchers, causing increased costs to consumers, and adding to food insecurity.” While the pace of gasoline inflation has moderated substantially in recent months, food inflation has generally gotten worse, and now stands at 13% year-over-year. Wages are only rising by around 5%, so it takes a bigger chunk of the family paycheck to fill the refrigerator.
The US energy market is complex and there’s no single cause for higher diesel prices. Part of the explanation is a 4% reduction in diesel refining capacity that began in 2020, when oil prices crashed and many producers lost money. There’s less refining capacity for gasoline, too, which is why the “spread” between the cost of oil and the cost of refined products has been higher than normal for most of this year—there’s a bottleneck in the conversion of crude oil into consumer products, which tends to push the cost of finished products up.
We’re potentially looking at not just low levels of diesel, but, a big shortage. Which will drive prices up, and then food and goods prices will go up. Biden’s choices are limited: it’s something that should have been addressed long ago, just like with the continuing baby formula shortage. He’s not worried, because he’s rich, and the taxpayer is picking up the tab for most of his food.
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