Why diesel prices are ripping higher

Yahoo Finance's Ines Ferré explains the factors pulling diesel prices higher as the U.S. faces a shortage amid refinery maintenance and the Russia-Ukraine war.

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BRIAN SOZZI: The US is facing a diesel inventory shortage, sending distillate prices higher. Yahoo Finance's Ines Ferre is here to break it all down for us. Ines on the diesel beat for us.

INES FERRE: I am on the diesel beat. And this is really fascinating because some of the factors that have to do with this diesel shortage that we're seeing in the US, well, they're seasonal. So you have demand that is up at this time of year. You've got farmers that are picking their crops. You've got the winter months that are coming. And also demand is up worldwide for diesel as well.

Then you've got the refiners that at this time of year, they tend to do maintenance. And then you've got refineries also that went offline during the pandemic in the past years because it simply wasn't profitable to be refining products. So you've got refinery that's at max capacity. And we've heard this before, correct? But then you've got the issues that are pertinent to this year.

And that is, of course, the Russia-Ukraine invasion and what that has done because of a ban of Russian products to the US because the US actually used to import some 700,000 barrels of petroleum and petroleum products, much of this used for diesel, for refining diesel. And that is now-- that's been banned because of that Russia-Ukraine invasion. And then, of course, US exporting diesel and other refined products abroad.

And that's not new per se. That has been happening. But when you have such a demand worldwide for these refined products, it may be more lucrative for these refineries to be exporting these products, rather than sending them to other parts of the US.

BRAD SMITH: Ines, why is the Northeast so vulnerable to diesel shortages then, too?

INES FERRE: Yeah, because basically, the Northeast, in order to get some of that diesel here, you've got to go through the ports. And that requires the Jones Act. And that means that this diesel has to come in on US vessels with US crews. Again, getting back to the bottom line for these refineries, it might be more lucrative for them to be exporting to other parts of the world, where this Jones Act doesn't take place.

And this also begs the question, should there be some type of waiver for the Jones Act, given that we have the winter months coming? I mean, they're talking about blackouts possibly in some parts of the Northeast because of the low inventory that we've got in this Northeast region.

BRAD SMITH: Wow, all right. That's extremely significant Thanks so much for breaking this down for us. Yahoo Finance's own Ines Ferre.