Rotterdam is outbidding Iowa for the same gallon

I filled up on Monday.

The sign had two prices on it. Regular on top, diesel underneath. Same station, same delivery truck, same barrel of crude behind both of them.

The gap between the two was the widest I can remember seeing.

The national numbers say the same thing. On August 31, regular gasoline averaged $4.071 a gallon across the United States. Diesel averaged $5.599.

That is a gap of $1.53 a gallon. Diesel now costs 37% more than gasoline.

A year ago the gap was 56 cents.

Two prices on one sign, and only one of them is moving.

Gasoline is up 89 cents over twelve months. Diesel is up $1.87.

Both fuels come off the same crude, in the same plant, on the same morning. So the price of oil cannot explain the split. Something is pulling the two apart after the barrel arrives.

The last time the gap came close to this was March 2008. Diesel cost 22.4% more than gasoline that week, and people wrote about it for months. We are well past that level now.

Diesel is not a niche fuel. It moves freight, it runs the combine, it fills the delivery van, and it heats a lot of houses in the Northeast in January.

So this one reaches you whether you drive a diesel or not. It arrives as a freight cost, and freight costs turn into grocery prices about a quarter later.

I have no idea when it normalizes.

But we are tracking that spread every week from here.

This connects directly to what happens inside the plant. A refinery does not turn a barrel into whatever you need most. It turns a barrel into a fixed mix, and the mix has moved.

In the week ended August 28, American refineries processed 17.5 million barrels of crude a day. That is 98% of capacity, the highest utilization since August 2018.

They ran 627,000 barrels a day more crude than in the same week last year.

And they made less diesel. Distillate output came in at 5.126 million barrels a day, about 127,000 barrels a day below a year ago.

So the extra crude went somewhere else. Jet fuel production ran at 2.03 million barrels a day, more than 10% above last year.

Unit limits, crude quality and plant design decide the split, and this year the split favours the airlines.

The number I keep going back to is 98%. Autumn maintenance season starts now, and there is nothing left in reserve to cover a single unplanned outage.

And here is where it spreads. The East Coast district supplies New York Harbor, New England and the mid-Atlantic. It is the region that burns heating oil in winter.

In the week ended August 28, its distillate stocks fell 1.7 million barrels to 19.3 million. Reuters reported that as a record low.

That is down about 33% from a year earlier. Ultra-low-sulfur diesel in the Lower Atlantic, which feeds the Southeast, is down roughly 40%.

Nationally, distillate sits about 14% under its five-year average. Only the Midwest and the Rocky Mountain district hold more than they held last year.

The Northeast is supposed to be filling its tanks in September. It is emptying them instead.

Most American homes that heat with oil are in the Northeast. Their supply is built up through late summer so it can be drawn down in January.

This year they start the winter from the bottom of the record.

Meanwhile, follow the barrels out of the terminal.

US distillate exports reached 1.9 million barrels a day, the largest weekly number in the EIA series. It beat the previous record, set in May of this year.

Shipments have run above 1.5 million barrels a day for weeks on end. The four-week average has been sitting near 1.7 million, roughly a quarter above last year's pace. Nearly all of it loads on the Gulf Coast.

Two things opened the door. Ukrainian drone attacks cut Russian refining, and Moscow then banned most diesel exports. Russia normally supplies about 12% of the world's diesel exports.

Global refinery throughput averaged 80.9 million barrels a day in July, about 5 million below a year earlier, according to the IEA.

So buyers in Europe, Turkey and Latin America pay a premium over the American wholesale price, cover the ocean freight, and still come out ahead.

A farmer in Iowa is bidding against a buyer in Rotterdam for the same gallon. Rotterdam keeps winning.

Three more things worth keeping track of.

The Netherlands is taking apart the largest pension system in Europe. About €550 billion of assets moved to the new defined-contribution rules in January, and ING expects roughly €900 billion more in January 2027. The system runs near €1.9 trillion, and the ECB reckons Dutch funds hold about 65% of all euro-area pension fund government bonds. Those funds have been the reliable buyer of 30-year and 50-year euro paper for two decades. That buyer is being retired on a schedule.

More than 3,500 commercial aircraft engines are sitting somewhere waiting on castings and forgings. An engine overhaul took 60 to 90 days in 2019. It now takes 180 to 240. So airlines keep old aircraft flying, and global maintenance spending is heading from about $136 billion last year toward $193 billion by 2036. The backlog of undelivered aircraft has passed 17,000.

The EIA raised its 2026 forecast for American coal exports to 102 million short tons in its August 11 outlook. Steam coal shipments picked up in the second quarter as buyers in Europe and Asia switched from gas back to coal. Coal exports were supposed to keep shrinking every year from here. They are going the other way. We'll see.

At four in the morning on Friday, June 21, 2019, a pipe elbow gave way in South Philadelphia.

It sat inside the alkylation unit at the Philadelphia Energy Solutions refinery. Federal investigators later read the stamp marks and dated the pipe to about 1973.

Hydrofluoric acid had been thinning it from the inside for forty-six years. That elbow had never been tested for corrosion.

By the end it measured 0.012 inches. About half the thickness of a credit card.

It let go. A cloud of butane and isobutane spread along the ground and found a source of ignition about two minutes later.

Three explosions followed between 4:15 and 4:22. The third one ruptured a surge drum. A fragment of that drum weighing 38,000 pounds flew about 2,000 feet across the Schuylkill River and came down on the far bank.

More than 3,200 pounds of hydrofluoric acid went into the air over a residential neighbourhood. A control room operator hit the emergency dump system within thirty seconds and moved most of the remaining acid to a tank away from the fire.

No one died. Five people had minor injuries.

One elbow of 1973 pipe, worn to half a credit card, closed the largest refinery on the East Coast.

That plant processed 335,000 barrels of crude a day. It was the biggest refinery on the East Coast and the eleventh biggest in the country, on 1,300 acres where refining had run since 1870.

Five days after the fire, the company said it would shut down. It filed for bankruptcy the following month.

The site sold. A developer levelled the pipes and tanks and started putting up warehouses.

Nothing replaced the 335,000 barrels a day. Nobody built a new refinery in its place, and nobody was ever going to.

That is how a region loses the ability to make its own fuel. One morning, one worn elbow, and then a permanent outcome that nobody actually chose.

Capacity is quick to lose and slow to build. We'll see.