As U.S. prices for diesel fuel surge to all-time highs, some California pumps literally can’t price their diesel any higher—maxing out the display at $9.999 per gallon.
Fuel-tracking firm GasBuddy reported Thursday that a small handful of California fueling stations hiked their retail diesel up to the maximum display pricing as the state’s overall diesel average hit $7.91 per gallon.
GasBuddy said it had confirmed that the $9.999 price was on displays at pumps in the San Diego suburb of Serra Mesa on Wednesday, and that it was investigating reports in other locations. Patrick De Haan, head of petroleum analysis at GasBuddy, cautioned that some pumps could simply be out of fuel. He noted that it is practice for some fueling stations to list “$9.999” to warn drivers away when diesel has run dry temporarily.
But what is clear is that several stations in California are pricing well above $9 per gallon.
On a national level, the U.S. average for diesel surpassed $6 a gallon this week for the first time ever. De Haan said the national diesel average could realistically rise to $7 per gallon in the weeks ahead. “There are really no signs of any improvement,” he told Fortune. “There are more signs of escalation. We’re headed in the wrong direction.”
De Haan said the first $9.999 reports gave him “chills”—for the first time ever, it’s a realistic pricing option.
De Haan said further clarification is needed if stations could legally be allowed to adjust the digital software and move the decimal place to charge over $10 per gallon, or to instead start charging by the half gallon or some other measure.
The California news comes as crude oil and fuel prices continue to spike worldwide amid military escalations in the Middle East and the effective closure again of the Strait of Hormuz bottleneck. While diesel prices are hitting record highs in the U.S., the situation is worse in the rest of the world where pockets of fuel shortages are projected, prices are higher, and inflationary pressures are growing on everything from groceries to other goods and services.
The global benchmark for oil spiked almost 8% on Sept. 10 from $101 per barrel up to $109—the highest since May. The average price for a gallon of regular unleaded gasoline in the U.S. was $4.27 on Sept. 10 and still projected to spike further. That’s the highest September price ever.
Eyes on the Middle East
OPEC reported that, for instance, Middle East energy leader Saudi Arabia’s oil production in August fell to its lowest output since 1990 at 6.2 million barrels per day—down from pre-war levels of 10 million barrels daily—as Yemeni Houthi attacks disrupted volumes through the Red Sea, according to OPEC stats. Houthi attacks have again escalated this week, including targeting critical Saudi oil pipelines. And more tankers are being targeted in the Strait of Hormuz.
But, while oil volumes continue to be drawn down from strategic reserves worldwide—the U.S. Strategic Petroleum Reserve is down to 44-year lows—no such reserves exist for fuel, especially diesel, which fuels the global economy for trucking fleets and more. The timing is particularly bad for the agricultural sector, which relies heavily on diesel, with its harvest season typically beginning in September.
“It’s going to be trickling down the [inflationary] supply chain in the weeks ahead,” De Haan said.
The highest gasoline and diesel prices are cumulatively costing Americans over $700 million more per day versus last year. De Haan said he would not be surprised if it rises to a $1 billion daily impact. Gasoline prices are painful, he said, “but diesel is really going to be the troublesome child.”
President Donald Trump said this week he is resigned that the Iran war will continue at least into November, although he argued it will be solved shortly after the midterm elections.
Apart from a peaceful truce in the Strait of Hormuz, the only solution is that prices rise more to force further “demand destruction” of oil and fuels, said Susan Bell, senior vice president for the Rystad Energy research firm. “I hate to say it, but we need prices at the pump to go up higher to encourage consumers to make choices on their energy consumption. We need more (global) austerity measures,” Bell told Fortune.
Everyone focuses on the price of oil spiking above $100 per barrel, but diesel costs are much more concerning right now, said oil forecaster Dan Pickering, founder of Pickering Energy Partners consulting and research firm.
“The [global] market is competing for a limited supply of diesel. So, at what point do we worry? We worry now,” Pickering told Fortune. “Prices are quite high and there’s no easy relief valve. Nobody is building new oil refineries.”