Diesel climbs to WTF record of $5.51, gasoline climbs to $4.18

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But wait a minute… crude oil futures are well below a record low.

By Wolf Richter for WOLF STREET.

The average retail price of No. 2 on-road diesel has jumped at $5.51 a gallon at the pump on Monday, May 2, the highest on record, the U.S. Department of Energy’s EIA reported late Monday, based on its surveys of gas stations conducted during the daytime. This comes despite the decline in crude oil prices from the March 8 high.

Year over year, the price of diesel has now jumped $2.37 per gallon, or 75%! Over the past four months, diesel has soared nearly 50%. This price increase puts additional pressure on truckers’ costs. And this will trickle down to everything that is transported by truck, which is sooner or later almost all products sold, causing additional costs for households, offices, construction sites and manufacturing plants:

The previous peak era for diesel occurred in 2008 and peaked in July of the same year at $4.76. Demand destruction related to the financial crisis, housing slump and construction slump then killed the price spike.

But adjusted for CPI inflation, the price at the time of $4.76 would be $6.22 today. So we still have a long way to go.

The average price of all grades of gasoline at the pumps jumped to $4.18 a gallon on Monday, the second straight week of increases, and was up 45% from a year ago, according to the EIA Monday evening. But it was still below the Monday, March 14 record of $4.32:

Adjusted for CPI inflation, this is far from a record. In July 2008, gasoline reached $4.11, which in today’s CPI-adjusted dollars would be $5.37 per gallon.

But wait a minute…WTI Crude Oil Futures at $105 a barrel are roughly where they were at the end of March, and are below where they were in 2013 and 2014, and well below the peak of July 2008, when they briefly kissed $150 on barrel.

And the amazing conundrum: the current price of $105 a barrel went from less $37 in April 2020.

Adjusted for CPI inflation, WTI futures at $150 a barrel in July 2008 would be $196 today. So, comparatively speaking, the US economy hasn’t seen anything yet. For a real oil shock to happen, prices would have to be much higher – and they could still get there.

Gasoline Futures have been horribly volatile since February, rising and falling day by day, but since mid-April they’ve trended higher (chart via Investing.com).

This idea that crude oil, diesel and gasoline prices would quietly return to “normal” seems far-fetched.

However, the inflationary mindset completely took over as the oil industry and gas stations were able to easily raise the price of diesel to record highs given the massive demand from truckers. And they were able to push the price of gasoline to near record highs. And they were able to do all of that, and still not trigger a buyers’ strike, even though crude oil remains at 30% below record highs, indicating an extraordinary inflationary mindset where customers are paying anything.

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