U.S. diesel crack spread surges past $106 per barrel, hitting a record high; Trump faces a 'midterm election shock'

On September 1, the U.S. diesel refining margin (diesel crack spread) surged past $106 per barrel, setting a new all-time high. Meanwhile, retail prices approached $5.63 per gallon. This energy crisis—triggered by the Iran war—is spreading across the entire economy, centered on diesel: fueling inflation, pressuring bond markets downward, dragging down stock markets, and imposing mounting political pressure on the Trump administration with less than two months remaining before the midterm elections. Soaring diesel prices directly impact agriculture, trucking, and winter heating demand—posing a political threat to the Republican Party’s core voter base in red states. On September 1, Trump urgently convened a White House meeting with major U.S. refiners—including Marathon Petroleum, Phillips 66, Chevron, Delek US Holdings, PBF Energy, and Valero Energy. According to the Financial Times, citing informed sources, the meeting focused on expanding refining capacity and lowering fuel prices. Afterward, Trump posted on Truth Social, announcing environmental waivers for small refineries and urging companies to ramp up production. Goldman Sachs promptly raised its 2027 forecast for U.S. diesel refining margins from $27 to $63 per barrel; its forecast for European refiners rose from $19 to $49 per barrel. As reported by Bloomberg, Goldman Sachs analysts wrote in their research note: “Ongoing disruptions to Middle Eastern and Russian refineries have further squeezed an already tight global refining capacity, pushing refined product margins to successive new highs.” The U.S. diesel crack spread—the price difference between diesel and other refined products and crude oil—has exceeded $106 per barrel. Triple supply shock: diesel at the epicenter of the crisis The surge in diesel prices stems from simultaneous breakdowns across three supply chains. First, the Iran war has effectively sealed off the Strait of Hormuz. Since late February, when the U.S. and Israel launched their first strikes against Iran, refined product exports from the Persian Gulf have plummeted to roughly 40% of pre-war levels, while crude exports have fallen to just 70–80%. According to Bloomberg, the U.S. carried out another large-scale air strike against Iran on September 1; Iran’s Islamic Revolutionary Guard Corps responded by warning of a “severe retaliation.” Second, Russian refining capacity has clearly declined amid the ongoing Russia-Ukraine conflict. Third, Middle Eastern refineries have sustained damage. According to Goldman Sachs data, global refinery shutdowns currently exceed seasonal averages by 60%; the International Energy Agency estimates that Iranian attacks have taken nearly 3 million barrels per day of refining capacity offline. According to data from the American Petroleum Institute, overall global crude processing volumes have declined by approximately 5 million barrels per day compared to one year ago. Diesel sits squarely at the center of this price surge: since February, global refined product wholesale prices have risen by $40 per barrel on average, with diesel accounting for over 40% of that increase. U.S. refiners operating at full capacity—but nearing limits Facing the supply shortfall, U.S. refiners are running at historically high utilization rates. According to data from the U.S. Energy Information Administration, for the week ending August 21, U.S. refinery utilization rates remained at or above 95% for 12 consecutive weeks—the longest such streak since 2000. Last week, utilization rose further to 97.4%. The American Petroleum Institute reports that U.S. diesel production in July reached a record high for that month.

Latent crisis within the Republican Party

Western media reports reveal widespread ambiguity among many Republicans regarding tariffs: they fear Trump’s authority yet worry about corporate backlash—a dilemma with no easy resolution. Below are their detailed positions, shared here for reference and analytical consideration. Please bear in mind these represent divergent viewpoints. The Republican lawmakers’ dilemma on tariffs Since Trump’s return to the White House, he has aggressively advanced his tariff agenda, positioning ‘reciprocal tariffs’ as the cornerstone of his economic policy. He insists such measures are essential to protect U.S. manufacturing and workers—but this stance has generated subtle tensions within the Republican Party. Many lawmakers privately acknowledge that tariffs are raising business costs and harming their home-state economies, yet publicly refrain from challenging Trump’s position. A telling case unfolded in Utah. In April, several Utah business leaders traveled to Washington to voice concerns to members of Congress, complaining that tariffs had driven up raw material and operational costs, jeopardizing investment plans. Republican Senator John Curtis, during a private conversation, expressed understanding—and even hinted he might support a bipartisan resolution aimed at limiting Trump’s tariff authority. Yet under pressure from party leadership and administration officials, he voted against the measure during the decisive vote, resulting in a 49–49 tie that killed the bill. Business leaders were disappointed—but also acutely aware of the Republican lawmakers’ predicament: they recognize corporate pain points, yet struggle to defy White House political pressure. Similar dynamics have emerged among other Utah lawmakers. Representative Celeste Maloy admitted privately that she prays daily for the tariff turmoil to end soon; another Republican lawmaker, Blake Moore, stated that if the administration refuses to compromise in negotiations, he may back congressional efforts to strengthen oversight of tariff authority.

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Senator Collins urged Trump to release Northeast Home Heating Oil Reserve stocks amid a 74% price surge in Maine. With US distillate supplies at record lows and diesel prices near $6.53, the move aims to alleviate consumer burdens.

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