The diesel apocalypse is here

On September 16 it cost $118 to turn one barrel of crude into diesel. The barrel itself cost about $102. That number explains more about your bills than the price of oil does. That figure is called the crack spread, and for most of modern history it sat around $20. The EIA's three-product refining margin averaged over $65 a barrel in August, the highest monthly reading since June 2006. Brent is around $102, up about 59% on the year. Diesel has risen far more. The world is not short of oil. It has lost the ability to process and deliver the oil it already has, and it is failing in three places at once. US refining capacity fell more than 250,000 barrels a day last year to 18.2 million, after a 263,776 b/d plant in Houston closed, a 138,700 b/d plant in Los Angeles closed, and a third California plant followed. No major new refinery has been built in this country in roughly 50 years, and a closed refinery does not reopen. Shipping is the second failure. Hiring the largest class of crude tanker went from about $30,000 a day to an all-time record near $1.27 million at the end of September, because much of the fleet is routing around the Cape of Good Hope, adding 10 to 14 days each way. One major energy waterway recorded a single transit on September 27 against a baseline near 85 a day. Freight per barrel went from about $3 to roughly $26. And global processing capacity is down elsewhere, with the IEA estimating more than 20% of one major refining nation's capacity offline.