For better or worse, much of the global economy is tied to the price of a barrel of crude oil. When it comes to actually moving goods around by sea, rail or truck, what really matters is a specific fuel that comes from that oil: diesel.
The average price of a gallon of diesel reached $5.12 this weekend, the highest ever recorded in the U.S. not adjusted for inflation. Even if you don’t drive a truck, the price increase might sting.
Many people probably don’t notice the price of diesel at the gas station. According to Troy Vincent, an oil market analyst at DTN, it might be worth paying attention to.
“People often underestimate these kind of second-order effects of higher diesel prices, and how they hit your pocketbook,” Vincent said.
Container ships, freight trains, big rigs, agricultural machinery and some delivery vans all run on diesel. And while demand for regular gas subsided during the pandemic because fewer people were driving, an influx of Amazon orders meant demand for diesel grew.
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“The vast majority of that freight process, behind those deliveries to your home, is ultimately powered with diesel fuel,” Vincent said. It’s why global diesel inventories were low before the Ukraine crisis.
Allen Schaeffer, the executive director of Diesel Technology Forum said Europe is now especially vulnerable because it depends on Russia for refined diesel, as well as natural gas and crude.
“A lot of their diesel fuel comes out of Russia,” Schaeffer said.
While commuters may take public transit to avoid paying higher gas prices, it’s not easy to substitute away from diesel. Container ships can’t take the subway.
“We don’t see any necessarily widespread replacement of diesel fuel over time,” he said. The shipping industry is trying to find savings where it can, adding more biodiesel from soybeans, which currently accounts for a little less than 1/10th of diesel consumption.
Freight operators are exploring fuel-saving technology, said Luisa Fernandez-Willey with the Association of American Railroads. “They [are] using different types of fuel and also looking at electric locomotives,” she said.
For now, most freight runs on diesel, just like much of the rest of the economy.