Diesel fuel crisis hits California as refinery capacity declines

The United States, particularly California, is facing a significant diesel fuel crisis driven by a shortage of refining capacity rather than a lack of crude oil. In California, diesel prices have reached record highs, with AAA reporting averages around $7.71 per gallon, significantly exceeding the national average of $5.85 per gallon.

This shortage is attributed to the closure of several major refineries, including facilities operated by Phillips 66 and Valero, which has reduced California’s refining capacity by over 20 percent. The widening diesel crack spread—the difference between crude oil costs and refined product prices—has exceeded $108, signaling structural supply issues.

The rising costs are placing immense pressure on the logistics and agricultural sectors. At the Port of Los Angeles, where nearly two-thirds of freight is moved by truck, smaller transport companies are struggling to absorb costs. In the agricultural sector, such as almond farming in Madera, fuel costs have reportedly increased by as much as 40 percent compared to the previous year, impacting the entire supply chain from cooling to distribution.