John Kilduff: This diesel price feeds right into the producer part of inflation

• Diesel crack spread topped $100/barrel for the first time this week, measuring the price difference between crude and refined products.
• Causes of record high diesel prices include global refinery outages, infrastructure damage, export disruptions (especially from Russia), and tight U.S. inventories.
• The U.S. national average diesel price is $5.57/gallon today, significantly higher than ~$3.72/gallon before the Iran war, with some regions seeing prices upwards of $7/gallon.
• An anticipated demand spike in late August/September due to the harvest season will add further upward pressure on diesel prices.
• Elevated diesel prices will feed directly into the Producer Price Index (PPI) and Consumer Price Index (CPI), putting the Fed in a difficult position regarding interest rate policy and potentially impacting GDP.

Soaring diesel prices, driven by global supply shortages (refinery outages, Russian export halt, Middle East disruptions) and rising US demand, are causing record crack spreads and national average prices. This is expected to fuel inflation, particularly in producer and consumer prices, and could limit the Fed's ability to cut rates, potentially shaving off GDP growth.