Ultra-low sulfur diesel futures on the CME swung sharply higher on Tuesday morning, rising roughly 20 cents in the span of about two hours after briefly trading negative the day before, according to FreightWaves energy analyst John Kingston. Kingston warned that prices could push back above $6 a gallon, and potentially well above that level, and described inventories as drawn down with policy options exhausted.
One policy lever drew specific criticism. The administration’s decision to allow red-dyed diesel, normally reserved for tax exempt off-road uses such as farming, to be used on road faces a physical problem, Kingston argued: the fuel is segregated in a separate supply chain, and large truck stop chains such as Love’s, TA and Pilot are unlikely to drain and reconfigure tanks for a programme expiring December 31. The federal excise tax embedded in the dye regime was set by Congress and cannot be waived by the executive branch.
The international backdrop in the same account matches the IEA’s morning report. A proposed US diesel export ban was pulled back roughly two weeks ago, G7 and other Western governments agreed to release around 100 million barrels of strategic crude and products, and IEA executive director Fatih Birol contacted member nations two days ago urging them to speed up stock releases with diesel prioritised over gasoline. Hormuz flows, which had briefly improved toward pre-war levels and pushed prices lower about a week ago, are deteriorating again amid renewed Iranian attacks on oil infrastructure, Kingston said.
He also flagged a longer consequence: sustained high diesel prices could accelerate electric vehicle adoption among buyers previously undecided, a factor he said was absent from the three big monthly oil reports a year ago, when all of them pointed to price pressure from EV penetration in markets such as Norway and China. For now, the operational fact is simpler. The fuel that trucks, trains and harvesters run on is trading like a market with nothing left in reserve.