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Russia-Ukraine: Retail diesel prices starting to spike following commodity moves

After several days in which retail diesel prices were lagging the huge gains in both commodity and wholesale diesel prices, the numbers at the pump are starting to climb.

The DTS.USA data feed in the FreightWaves SONAR market dashboard moved up close to 15 cents a gallon between Thursday and Friday. That is far bigger than the roughly 7 cent move between Wednesday and Thursday and the increase of just slightly more than 4 cents between Monday and Wednesday.

The moves have taken the average national retail price of diesel up to $4.283 per gallon at the start of the day Friday from $4.023 on Monday. 

But more stark are the changes at Pilot Flying J, one of the leading truck stop companies in the country.

Pilot Flying J posts a downloadable spreadsheet of all its fuel prices, as well as diesel exhaust fluid, on its website. The company’s more than 800 sites are all listed on the spreadsheet.

It shows that on average, Pilot Flying J has lifted its average retail diesel price by more than 36 cents per gallon in just two days. There is no reason to believe that what PIlot Flying J is pricing its diesel at is significantly different from what other retail outlets might be doing. 

Within the Pilot Flying J data, there are wide divergences. An increase of 40 cents per gallon seems to be the most prevalent move, but there are outlets up as little as 20 cents per gallon or even 10 cents. One Pilot Flying J store, in Red Oak, Texas, is up 60 cents per gallon.

Increasing retail levels by 40 cents per gallon in just two days doesn’t even cover what the national average wholesale price is doing, according to the ULSDR.USA data stream in SONAR. That price rose to $3.666 a gallon Friday from $3.10 a gallon just two days ago, a roughly 56 cent increase.

There’s more moves to come. Ultra low sulfur diesel on the CME commodity exchange rose another 7.8% Friday, settling at $3.7763 a gallon, a gain of 27.29 cents a gallon. It’s the highest settlement since July 21, 2008, and is knocking on the door of being one of the 30 highest settlements in the history of the CME distillates contract, which started life as a heating oil instrument before converting into an ULSD contract.

One development in the market Friday that could signal a shift, or possibly was just a one-off: A cargo of Urals crude was sold to a major oil company. Shell is reported to have purchased Urals, which is the benchmark Russian grade, at the dated Brent benchmark minus $28.50 a barrel. That spread post-invasion has blown out to unheard-of levels; Urals generally trades a few dollars under Brent. But as companies and traders engaged in “self-sanctioning” and avoided Urals and much other commerce with Russia and its companies, the price of Urals sunk but found no buyers. 

The refusal of companies to buy Russian crude has amounted to a de facto unofficial embargo, and it is one of the main reasons why the price of oil continues to climb. Even without any sort of formal ban on purchasing Russian oil, an unofficial one acts as a force that restricts supply. Rough estimates are that Russia’s normal 6 to 7 million barrels a day of oil exports, in the form of crude or products, has probably been cut 2 million billions a day. 

The Shell deal is a crack in the self-sanctioning and suggests there might be a price so low that it clears Russian supply and feeds it into the market. 

In other FreightWaves coverage related to the Ukraine-Russian conflict:

Russian invasion propels price of ship fuel to historic high

Soldiers win battles; logistics wins wars

Russia sanctions cut both ways for air cargo