Well, That Escalated Quickly: Impact of US-Israeli Strike on Iran

Well, That escalated quickly. Since news broke early Saturday morning of the joint US-Israeli strike on Iran, ULSD futures are up over $1.00 and Gasoline is up roughly $.35. Everyone has asked why ULSD much more than Gasoline. The partial answer is three-fold.

The US is primarily a gasoline based economy, with solid supply and refining capacity. We average only about 10% of or imports from the middle east. Europe, China and others are primarily diesel based economies and their structural dependance on Mid-east energy makes them more vulnerable to conflicts in the area. Since sanctions were imposed on Russian products to Europe, the US has been picking up the slack with exports of distillates. So the closing of the Straits of Hormuz exposes a weak point in those nations already hungry for distillates and energy, and an opportunity for others like institutional investors and market makers. Up like a rocket, down like a feather. You have heard it before, also why it is prudent to have some fixed price gallons on hand. We do not foresee any supply disruptions at this time as markets are well supplied. If this was December, that might be a different story. We’ve been working round the clock and will continue to do so until this passes. Please do not hesitate to reach out with any questions or concerns.