The average retail price of ultra-low-sulfur diesel has risen nearly a dollar per gallon in the past month, and prices are likely to go higher as crude oil prices spike and President Biden announced a ban on Russian oil imports.
Figures from the Department of Energy show the national weekly average as of March 7 of $4.85, up from $3.95 a month earlier. The 90-cent jump is the biggest in the Department of Energy’s records going back to February 2007 and also the highest average price. The last time it was this close was $4.771 in July 2008.
Unless something drastic happens, we are headed to pump prices of more than $5 a gallon for diesel, said Tom Kloza, head of global energy analysis at Oil Price Information Services.
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
Russian Oil Ban
On March 8, President Biden announced that as part of the West’s economic sanctions it has been taking against Russia in response to the attack on Ukraine, that the federal government is banning all imports of Russian oil and gas and energy.
Oil futures rose in response, with West Texas Intermediate crude rising as much as 7% to trade above $128 per barrel, according to CNBC; It ended the day 3.6% higher at $123.70. Brent crude oil, the international benchmark, jumped 7.7% to $132.75; at the end of the session the contract stood 4.3% higher at $123.21.
“The market has already been self-sanctioning the Russian energy complex, with buyers avoiding the nation’s oil,” CNBC pointed out.
The U.K. also announced it would phase out Russian oil imports by the end of the year. However, so far other European countries have not announced bans.
A senior administration official explained in a call why the U.S. is able to take this action even though our allies in Europe are not doing the same. The official pointed out that in 2021, Russian oil was just under 10% of U.S. overall imports of oil but a third of Europe’s imports.
In addition, this official said, “the U.S. produces far more oil domestically than any of our allies. In fact, we’re a net exporter, the leading oil and gas producer in the world.”
“The United States is able to take this step because of our strong domestic energy production and infrastructure. And we recognize that not all of our Allies and partners are currently in a position to join us.”
Some critics have said Biden administration policies limiting oil drilling are hampering U.S. oil production, but the official said that “U.S. oil and gas production is approaching record highs while thousands of drilling permits on federal lands go unused. So federal policies are not limiting the production of oil and gas.”
The administration also used the situation to push the transition away from fossil fuels.
“In the long run, the way to avoid high gas prices is to speed up, not slow down, our transition to a clean energy future. The reality is we can’t drill our way out of dependence on a global commodity that’s controlled, in part, by foreign nations and their leaders, including Putin. The only way to eliminate Putin’s and every other producing country’s ability to use oil as an economic weapon is to reduce our dependency on oil.”