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The price of crude oil on the world market exceeded $100 per barrel. This helps to explain why gas prices are elevated and diesel prices are soaring, just as the government prepares to issue an inflation report. NPR's Scott Horsley reports.
SCOTT HORSLEY, BYLINE: The U.S. and Iran have ramped up their attacks in and around the Strait of Hormuz this week, pushing oil prices higher. Aaron Brady of S&P Global Energy says while some oil is finding alternate routes to market, overall deliveries from the Middle East are only about half what they would normally be.
AARON BRADY: Ever since the hostilities have resumed, that spigot has been tightened. It's not entirely closed, but we're still nowhere near what we were at pre-war levels.
HORSLEY: And it's not just the shortfall in crude oil shipments that's causing pain at the gas pump. Global refining capacity has also been curtailed by fighting in the Middle East and the war between Russia and Ukraine. Refineries in the U.S. are working at 98% capacity. And the so-called crack spread between the cost of crude oil and the price of refined fuels is at or near record highs.
BRADY: No one really consumes crude except for refineries. The economy runs on diesel, gasoline, jet fuel, those kind of things. And that's where the real shortages are occurring, and that's why you're seeing really a disconnect between the price of crude and the price of products, especially diesel and jet fuel.
HORSLEY: AAA says the price of diesel fuel is now the highest it's ever been, and that affects the cost of lots of other goods. Take, for example, the half-million cargo containers that came through the busy port of Los Angeles last month. The port's executive director, Gene Seroka, says two-thirds of those containers will leave the port on the back of a diesel truck carrying parts to factories or finished goods for store shelves.
GENE SEROKA: Everybody's running as fast as they can. But the higher these fuel prices go, just simply mean higher prices for American families.
HORSLEY: Some of the wartime spike in energy prices will be reflected in the August inflation report, which comes out tomorrow. Policymakers at the Federal Reserve have said they'll be watching that report closely as they decide whether to raise interest rates next week.
Scott Horsley, NPR News, Washington.
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