Oil is trying to get a grip this morning, and diesel is doing what diesel does when the world runs short of refining capacity and export routes: it is making new records. It also reminds us that good smart energy policy is national security. When you have a rouge regime and its proxies trying to attack the global economy its time to take the regulatory gloves off Consider if you will that the diesel national average is sitting near $6.27 a gallon on the AAA survey, and s latest weekly print put on-highway diesel at $6.285. Regular is not cheap either — EIA has all-grades at $4.455 and regular around $4.32. That is not a “transition.” That is the bill coming due.
Saudi Arabia is working the workaround after last week’s drone hits on the East-West pipeline — Petroline, the 1,200-kilometer lifeline that had been moving as much as 4 million barrels a day, or roughly 4% of world supply, from the Gulf fields to Yanbu on the Red Sea. Riyadh shut it as a precaution. Repairs could take three to six weeks. Kpler’s base case is that it comes back at maybe half of pre-attack throughput, which could cut Yanbu loadings by 2.5 to 2.7 million barrels a day. The Saudis have storage, they have tankers, and they are telling the market they can redirect about 3 million barrels a day through Ras Tanura. That takes roughly 25 extra shuttle VLCCs a month. The catch is geopolitical: more oil through the Persian Gulf means more oil that has to live with the Strait of Hormuz. Dubai differentials stay supported even after the first spike fades. And yes — some European refiners have been told September loaning cargoes are canceled. That headline should have given us a pop. It did.
This attack moved the needle. It also pulled Riyadh closer to a more active military posture. The kingdom had been able to keep a lot of barrels off Hormuz while the pipeline was running. Now they are almost forced back into it. That raises the risk that Houthi and Iranian-backed groups — including the ones launching from Iraq — get a more direct Saudi response. Missiles out of Iraq are not a rounding error. They are a risk premium. Yemen did hit the Houthi’s hard and the Saudi’s should be right behind them
On diesel, watch the Russia-Ukraine energy-infrastructure talks that Trump has been pushing. If the tit-for-tat on refineries and export terminals actually stops, Moscow can lift the export squeeze and put barrels and products back into a market that Europe and Asia desperately need. The U.S. already answered with record product exports. It helped that U.S. and Mexican refiners have been able to run more heavy Venezuelan . That is not ideology. That is molecules.
Keep an eye on Washington and Beijing. More reports that China is helping Iran with logistics — and maybe rail purchases — sit right next to talks that still look like they could produce another trade deal between Trump and Xi. Energy and trade are not separate files anymore.
Here is the part that should have been obvious years ago: this is not just an oil problem. It is a refining problem. The war exposed it. The green-energy crackdown created it. For years we treated refineries like a moral failure instead of the machines that turn crude into diesel, jet, and gasoline. Capacity was restrained before a single drone flew. Now the world is at war and we are discovering, in real time, how silly and how dangerous those policies were. You cannot virtue-signal your way through a 4-million-barrel pipeline outage.
Which brings me to Governor Kathy Hochul. Welcome to the Drill Baby Drill camp, Governor. It is funny watching Albany suddenly discover high energy costs after years of killing every reasonable project that would have lowered them. New York is mailing $200 rebate checks to 8.2 million households. That is a bandage. The wound is policy.
A moratorium on hyperscale data centers and a go-slow on AI may play well in a press release, but it is an impediment to using the same technology that can make the grid more efficient. Everybody talks about AI as an energy hog. Fine. It is. But the hyperbole that it will bankrupt every ratepayer ignores a simple fact: the countries that win will produce power. The technology that uses energy can also find the answers — if you let people build plants, pipelines, and intelligence.
President Trump’s comments took some of the froth off the early spike. We pulled back. Prices are still elevated, and they should be. We are back to watching Hormuz flows and whether Saudi Arabia actually increases Gulf loadings. Watch Romeoville after that Midwest power outage. Watch Bab el-Mandeb after the Houthi moves. And watch Houston, where EPA Administrator Lee Zeldin just finalized the repeal of the 2024 power-plant carbon rules at the G20 Energy Abundance ministerial — billed as the largest power-sector deregulatory action ever, with more than $300 billion in projected savings, plus a proposal to wipe the rest of the greenhouse-gas standards off the books. That is how you keep coal and gas plants online for the AI and data-center load instead of retiring them on a spreadsheet.
Practicality over ideology. Western Hemisphere barrels from Alaska to Argentina. Venezuelan heavy crude in the system. Refineries running. That is the workaround that actually works. The green-energy experiment left us thin, exposed, and paying $6-plus diesel. Reversing it is not a slogan. It is national security.
And the diesel crack spread again as the place where we’re seeing most of the pain the gasoline crack has been struggling a little bit but shouldn’t gain as we are still going to need gasoline as well
is putting in a decent upside performance today, and that is a credit to the men and women who produce, move, and export this fuel every day. While the headlines love to bounce between $3.00 and a selloff, the industry keeps showing up — record-range production when it can, LNG terminals running hard, and power plants still calling on gas when the mercury climbs.
Fox Weather is pointing to more heat, and that is exactly the kind of late-summer support the market likes. EBW Analytics notes that natural gas retreated from $3.00/MMBtu after three failed intraday probes above that level quickly recast the NYMEX front-month in a bearish light, with October falling as low as $2.753 Thursday. Still, they say bullish weekend weather swings and an escalating year-over-year storage deficit suggest another test higher. Eventually the year-over-year storage deficit may narrow into late September and October, and NYMEX winter weakness may keep a short-term soft ceiling near $3.00. Higher production remains a bearish longer-term indicator — but that production is also why America can keep the lights on and still send gas overseas.
Celsius Energy adds the European piece: after climbing above the five-year average in late August and early September, European daily storage injections have steadily declined back below that average over the past week. With inventories still at five-year lows, they say it looks increasingly unlikely storage will make it to 3,000 Bcf. It should come down to the weather.
Fresh tape this morning backs the bounce. Front-month gas has been working higher on a drop in daily output, firmer LNG flows, and that heat bid. Reports put October around the high $2.80s to low of $2.90s after climbing about 2% on Monday. Average Lower-48 output slipped toward a two-week low even as September production as a whole remains near record territory. Flows to the big U.S. LNG plants have been running in the mid-to-high 18s Bcfd, with some daily prints near 19.6 — the strongest stretch since spring. Natural Gas Intelligence says futures rebounded as September cooling demand chased record territory, while Southeast cash prices vaulted as heat tested pipeline limits. Storage is still the referee: last week’s build was larger than expected, but analysts see this week’s injection coming in below year-ago and five-year norms, which would widen the year-over-year deficit and trim the surplus to the five-year average.
