PRETTY PENNY: Move over gasoline, it’s time for a new transportation fuel to take the spotlight. The price of diesel — the fuel that powers delivery trucks, trains, buses, boats, tractors and construction vehicles — has spiked dramatically in the past two months. Its national average hit $6 per gallon for the first time ever Friday. It kept going up, racking up a series of new all-time highs and landing at $6.39 per gallon Thursday, according to AAA. California has followed that trend, with diesel prices hitting an all-time high of $8.34 per gallon Thursday. The run-up has been less severe in California than the nation as a whole (from July 6 to Sept. 14, retail diesel prices increased by 32% in California and 37% nationally, according to the U.S. Energy Information Administration). Nonetheless, since California started with diesel prices far above the national average, its $8.34-per-gallon price Thursday is by far the priciest in the country. That led to a series of embarrassing headlines for California leaders, with national news outlets seizing on some gas stations maxing out the prices on their three-digit-limited marquees with $9.99-per-gallon diesel listings. That, in turn, has set off a round of finger pointing, as political actors aim to paint their opponents as the culprit for the sky-high costs. On Monday, Gov. Gavin Newsom’s office put out a lengthy press release criticizing Energy Secretary Chris Wright and accusing President Donald Trump of having “no viable plan to protect Americans from his Iran war gas and diesel price spikes.” On the other hand, Republican lawmakers are blaming Democratic policies for why a gallon of fuel in California is roughly $2 more expensive than the national average “The Iran war is having an impact on fuel prices, that's true. But 100% it's California policies that [gave us] the highest gas in the nation,” said Rep. James Gallagher, who is running in a competitive Northern California district. “Cap and trade, highest gas tax in the nation, right. We passed these policies that ended up shutting down two refineries.” California bashing aside, the high diesel prices have created a huge liability for Republicans, according to conservative political consultants. That’s because the war in Iran, spearheaded by Trump, is a major cause of the supply disruptions that have made fuel prices soar. “Diesel is the fuel for goods movement, and it's also more of a blue-collar fuel. It's a fuel for large trucks and people who haul things,” said Rob Stutzman, a California-based Republican political strategist. “None of that's ideal for Republicans who are concerned that their base is wondering why they haven't done the primary job they were elected to do, which is reduce the cost of living.” But it’s not all Trump’s fault. In recent months, Ukraine has attacked Russian oil refineries, knocking out a significant share of the nation’s fuel production infrastructure and prompting Russia to ban diesel exports. That’s taken one of the world’s largest suppliers off the market, limiting supply worldwide and sending prices soaring. In addition to providing local supply, California oil refineries also export diesel. That ties the state’s diesel prices to fluctuations on the global market, according to Aaron Smith, an economist and professor at the University of California, Berkeley. And it limits the options available to state policymakers to put in any sort of quick fix when price shocks happen. “As long as crude oil supplies are disrupted by the conflict in the Middle East and also in Ukraine and Russia, then that’s going to keep prices high,” Smith said. California fuel suppliers are feeling the squeeze, according to Dow Jones Energy's chief oil analyst, Denton Cinquegrana, who said he heard one thing over and over again at a San Diego area industry conference last week: “It’s really tough to find diesel.” That’s having a slew of knock-on impacts for the businesses across the state that power their operations using diesel. And it’s especially true for the trucking fleets that move produce to grocery stores and shuttle goods from ports through the state’s extensive warehouse network. Eric Sauer, CEO of the California Trucking Association, said he’d bet that most trucking companies operating in the state are charging their buyers fuel surcharges, raising costs that are ultimately passed on to consumers. And even then, surcharges likely recoup only 60% to 70% of fuel price increases, forcing fleets — 91% of which operate 10 or fewer trucks — to absorb the rest. “Unfortunately, I think consumers in California are getting kind of [a] double whammy on this,” Sauer said. “You're paying more at the pump, and then you're also paying more for the goods and services.” But the record-breaking diesel prices are not all bad news for California, at least when it comes to the state’s climate goals. That’s because both trucking industry leaders and clean transportation advocates agree that sustained high prices will push more fleets to consider buying electric trucks, like the Tesla Semi. “Tesla and Trump have been good for electrification. Who would have thunk it?” said Ray Minjares, heavy-duty vehicles program director at the International Council on Clean Transportation. “The market is moving in favor of electrification, despite the tearing down of government regulations.” Did someone forward you this newsletter? Sign up here!
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