AYESHA RASCOE, HOST:
The U.S. military said it struck three Iranian oil tankers yesterday and that it attacked the vessels after Iran fired ballistic missiles at a U.S. aircraft carrier and destroyer. This flare-up in fighting is having a big impact on the energy markets. Diesel fuel prices hit a record high this morning, up more than 50% since the start of the war. David Goldwyn served as an energy envoy for the State Department during the Obama administration and joins us now. Good morning, David.
DAVID GOLDWYN: Good morning, Ayesha. Good to be with you again.
RASCOE: Let's start with diesel. It's used by many businesses to run factories and equipment. Why are we seeing record prices right now?
GOLDWYN: Well, there are really three reasons, Ayesha. First is that the refineries use crude oil to make diesel. And so the price of crude is up, so that puts some upward pressure on it. But the real challenge is that we've lost almost 3 million barrels a day of refining capacity from the Persian Gulf. And it was a major refiner of the - what they call these middle distillates - jet fuel and diesel.
The other reason is that Ukrainian attacks on Russian infrastructure - both its ports and its refining capacity - has led to a loss of almost 330,000 barrels a day in Russian exports of diesel. They were another big refiner. And so they have an export ban, and they're using that more for domestic consumption.
So you put those two things together, and you have a lot more countries competing for a much smaller supply of diesel. That's making the prices go up. And unlike crude, which you can get from a lot of places, you can't build another refinery really quickly. And so there's no way to replace that other than by the market forces of high prices.
RASCOE: So there's a lot of pressure on diesel right now. What will be the impact of those higher diesel prices on the wider economy?
GOLDWYN: Well, diesel has a higher inflationary impact on the economy than gasoline. It's kind of like the hidden fuel, but you use diesel for transportation. Seventy-five percent of transportation is diesel in the United States. So you're talking about trucks. You're talking about agricultural combines. You're talking about every package that Amazon delivers to your door and all the food which shows up in your grocery store. So as the price of diesel goes up, and jet fuel also for air travel, everything that gets moved around the country and virtually everything in agriculture costs more.
And so you're seeing diesel prices rise first. The fuel bill is going to come to these folks in October. And we're going to see it in the cost of virtually everything from food to toys to manufactured goods come December.
RASCOE: We're six months into this war, and there are these conflicting reports over how much oil is going through the Strait of Hormuz. You have the energy secretary, Chris Wright - said that more than 17 million barrels went through on Monday. That's almost pre-war levels. But independent ship-tracking firms say oil exports are a lot lower. How can you explain that discrepancy?
GOLDWYN: Well, the amount of traffic that goes through the strait changes from day to day. And what does get through is basically now trying to go in secret. So they turn off the devices, you know, sort of the transponders, which are normally used to track them. So now you're talking about satellites trying to see ships at night. So they're harder to see. They're not really advertising themselves. And there's a - you know, probably a little bit of a bias for the energy secretary to inflate a little bit how good things are so that people feel that oil prices might come down.
But as you point out, the TankerTrackers and others are showing that traffic is - you know, is quite minimal. And it depends on the day. Now that you've had this exchange of attacks over the weekend, with the U.S. attacking Iranian tankers and Iran striking back, shippers are going to be more reluctant to go through. So a week ago, you might have had a couple of attempts. This weekend, nobody's probably trying to get through the strait. So it's a lot of variation. But as we pointed out earlier, it's down at least by half compared to what it was before the war. And in terms of oil prices and gasoline prices, what really matters is refining.
RASCOE: You know, prices are high now, but analysts had thought they would go higher even than they are. Have you been surprised by what's happened?
GOLDWYN: A little bit, yes. We've been able to get more oil out of the Gulf, really, by alternate routes. And there's been more production from other countries, which has come faster. But as we see now, we're running up against this refining constraint. You can have more oil, but it doesn't give you more diesel or jet fuel.
RASCOE: That's David Goldwyn, president of Goldwyn Global Strategies. Thank you so much for speaking with us.
GOLDWYN: My pleasure. Transcript provided by NPR, Copyright NPR.
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