U.S. diesel prices hit a record high as refinery shutdowns in the Midwest exacerbate the situation

As diesel prices in the United States have already risen to historic highs, a major refinery in the Midwest has suddenly gone offline, further increasing the risk of tightening regional fuel supplies. If the outage lasts longer than expected, price pressures on diesel could spill over to the gasoline market and drive up fuel costs across several Midwestern states.

ExxonMobil’s refinery in Joliet, Illinois, with a daily processing capacity of 275,000 barrels, was forced to shut down last Sunday after a power outage triggered a safety flaring system. According to Reuters, documents released by the refinery on Thursday revealed that a pumping station was also flooded. ExxonMobil stated that the outage was due to the failure of both primary and backup ComEd power lines supplying the refinery, power was fully restored on Thursday, but fuel production has not yet resumed.

Meanwhile, price pressures in the US diesel market are already significant. According to the latest AAA data, the national average retail price for diesel has risen to $6.45 per gallon, setting a new record high. Market participants warn that if the shutdown at the Joliet refinery is prolonged, fuel supplies could tighten further in Illinois, Indiana, Ohio, Wisconsin, and Michigan, with gasoline prices in some regions possibly even exceeding $5 per gallon.

Joliet refinery outage puts Midwest fuel supplies under pressure

The Joliet refinery is located about 40 miles southwest of Chicago, producing about 11 million gallons of gasoline and diesel per day, mainly supplying the Midwest market. Its crude oil processing capacity accounts for roughly 6% of total Midwest refining capacity and about 1.5% of total US refining capacity, making it a key player in the regional fuel supply system.

Patrick De Haan, Head of Petroleum Analysis at GasBuddy, stated that spot diesel prices in the Great Lakes region have now reached the highest level in the country, at $240 per barrel. He predicts that gasoline prices in Ohio face a high risk of rising, with Wisconsin and Indiana at medium risk, while Michigan and Illinois face relatively lower risk, but in some areas prices could still exceed $5 per gallon.

Compared to gasoline, pressure in the diesel market is more widespread. De Haan said that diesel prices in most of the aforementioned states face moderate to significant risk of increase. With the national retail price of diesel already at a record high, the speed at which the Joliet refinery recovers production will be a key factor influencing fuel supplies and price trends in the Midwest.

Global refining capacity under pressure, diesel price surge could spill over to gasoline

The Joliet refinery outage is not an isolated incident. Global refining capacity continues to face disruptions, and fuel supplies are already under pressure. This week, Goldman Sachs commodity analysts Yulia Zhestkova Grigsby and Daan Struyven warned that a tight global diesel supply could further spill over into the gasoline market.

With tight supplies, refiners may prioritize production of higher-margin diesel, reducing gasoline output. Mike McGlone, senior commodity strategist at Bloomberg Intelligence, said on Monday that diesel at $6 per gallon is a reminder of the 2008 gasoline shock, highlighting current price pressures in the fuel market.

If refinery outages and global supply disruptions persist, rising fuel prices could further heighten inflation expectations and put pressure on interest rates and risk assets. Meanwhile, the security situation in the Strait of Hormuz remains tense, with geopolitical risks continuing to support oil prices. Uncertainty in global energy markets remains high.