Inside today’s Daily Journal…

Editor’s note: In honor of Good Friday and Easter, Porter & Co. will be off tomorrow: But just like Jesus, The Daily Journal and our customer service team will return – on Monday.

The world needs one barrel of this fuel for every three people on Earth, every single day.

It can’t be replaced with any other fuel. And virtually every industrial and agricultural process depends on it.

I’m not talking about oil. Or gasoline.

I’m talking about the fuel that powers every economy on Earth: diesel.

Every day, the world consumes roughly 29 million barrels of diesel and similar gasoil fuels. Global oil demand of all kinds is about 105 million barrels per day. So diesel alone is only about a quarter of that. But it’s the most important fraction. And it’s impossible to replace.

Diesel is no ordinary commodity. It is distilled from crude oil in a precise alchemy that begins when raw barrels – pumped from the deserts of Saudi Arabia, Iraq, and the UAE – are heated in towering refinery columns. Lighter fractions rise first (gasoline and naphtha), followed by the middle distillates boiling between 315°F and 450°F that yield diesel.

Hydrotreating these middle distillates scrubs out sulfur to meet ultra-low-sulfur diesel standards. The result: a dense, high-energy fuel that powers 99% of the heavy trucks, locomotives, ships’ auxiliary engines, farm tractors, mining haulers, and emergency generators that underpin modern civilization.

Virtually every long-haul truck on every continent runs on diesel. Without it, global supply chains seize.

One barrel of crude typically yields about 23% diesel after refining – far more than gasoline in many complex facilities – making it the workhorse of freight, agriculture, and construction.

In large-population economies, the stakes are existential:

If the Strait of Hormuz remains closed, the world’s economy will collapse. And the reason it will collapse is diesel.

In a typical year, New York Harbor ultra‑low‑sulfur diesel trades somewhere in the $2.25 to $3.25 per gallon range. When diesel pokes above $3.50, people in the business start using words like “tight.” On March 20, the price hit $4.71. If you own a trucking fleet, your single largest operating cost just went vertical. The only time prices have ever been higher was at the beginning of the Russian-Ukraine war. The price hit $5.33 on May 11, 2022.

Europe has its own benchmark called ICE Low Sulphur Gasoil. In calm times it trades between $600 and $900 per metric ton. But when Russia rolled into Ukraine in February 2022, that contract raced up, peaking around $1,250. Today, it’s trading over those previous records around $1,400.

Asia is telling the same story. Singapore’s 10‑ppm (parts per million) gasoil, the key reference price for diesel in the Pacific basin, is trading at an all-time high near $200 per barrel, up from $90 pre-Iran-war.

The “crack spread” is the margin a refinery earns for turning crude into diesel. Think of it as the toll the market pays per barrel to get crude oil converted into usable fuel. Normally the crack spread is $15 to $20 per barrel – not a major factor in energy cost. During the worst of the Russia‑Ukraine shock, diesel cracks rose above $50 per barrel.

Today, the crack spread is over $70 per barrel.

Refiners who can still make diesel are being paid three to four times the normal margin, because there’s a global race on to secure diesel.

The world can’t simply replace the Gulf’s heavy oil with more light sweet crude from the U.S. Permian Basin. The crisis isn’t merely geopolitical. It’s a molecular mismatch.

The Gulf’s heavy, sour crude contains more “middle distillate” precursors. Complex refineries use hydrocrackers and delayed cokers to squeeze every drop of energy out of these molecules to create diesel fuel. The Permian’s light sweet crude contains more “light” molecules. When you put light crude into a complex refinery, the machine produces gasoline and naphtha – not diesel. Even if the world’s refineries could run at 100% capacity on U.S. light crude, their diesel yield would drop 20%.