Daily Brief: Where Our Diesel Goes

By Squarespace, Meta and Gemini.
If you’ve ever wondered about the selection of videos… I post what YouTube wants me to. Some readers can see the common threads between the posts and the videos, others think it’s not coherent. We understand.

There have been a few articles lately about the curious case of diesel prices behaving like gum stuck to your shoe — stubborn, irritating, and impossible to flick off without making a mess. So I grabbed Gemini and Meta, made them argue over a virtual cup of coffee, and did some digging. I then surgically removed all the oily insider jargon so this briefing reads like it was written for an average American Joe — not an energy trader with a fondness for spreadsheets and bad ties.

Short version: diesel is being sticky, and sticky diesel is sneaky. It smells like tar and shows up in places you don’t expect — from the price of shipping your online shopping spree to the cost of getting groceries to the price tags on things made in factories. If diesel keeps sticking around, it can puff up inflation, which tickles the Fed’s math, which then jacks up interest rates — and suddenly your mortgage, credit card bill, and even the interest on government debt decide to join the conga line of pain.

Here’s the nerd-free breakdown, with the amusing bits left intact:

• What is the “crack spread” and why should you care?

  • The crack spread is oil-industry shorthand for the difference between the cost of crude oil and the price of the refined products you actually use (like diesel and gasoline). Think of it as the profit margin for turning raw oil into stuff that powers tractors, trucks, and your neighbor’s inexplicably loud pickup.

  • A country with normal economic instincts would sometimes subsidize that spread so diesel prices don’t spike and start wrecking everything else. That’s like putting a Band-Aid on an obvious gash — cheap and sensible.

• Why the government doesn’t just subsidize it (and does that make sense?)

  • Subsidizing diesel would cost millions or billions. Sounds like a lot, and it is — but ramping interest rates because sticky diesel pokes inflation upwards costs trillions over time. That’s the economic version of skipping oil changes and then buying a new engine.

  • But we are long past the point of “normal country” decisions. So the result is: no tidy subsidy today, but painful ripple effects later. Welcome to the bureaucratic funhouse.

• How diesel price stickiness bleeds into inflation and the Fed’s decisions

  • Diesel is a backbone expense for logistics and industry. When it rises, businesses have two choices: swallow the cost (hurts margins) or pass it on to you (hello, inflation).

  • Inflation influences the Fed’s “neutral rate” math — the mythical interest rate that keeps the economy from overheating or collapsing into gloom. Sticky inflation nudges the Fed to raise rates to cool things down.

  • Higher interest rates aren’t just a dry policy memo: they make mortgages pricier, make governments pay more on their debts, and generally make everyone wish they had stocked up on canned beans earlier.

• Cost tradeoffs in plain English

  • Subsidy: pay now in the millions/billions to make diesel less painful.

  • No subsidy: pay later in higher rates and trillions of dollars of added costs (and a side of economic grumpiness).

  • Which is cheaper? On paper, subsidizing the crack spread is a bargain. In practice, ideological, political, or logistical reasons often push leaders to choose the expensive, slow-burn route.

• So what should you, the Average American Joe, take away?

  • Diesel matters more than you realize. It’s the quiet backstage hand that controls a lot of the price tags you see.

  • If diesel keeps behaving like gum on a hot sidewalk, expect inflation to play tag with interest rates — and for your wallet to be one of the players.

  • Policymakers could choose a relatively small fix now, or let things get worse and pay much more later. The chestnuts of policy are often roasted on the open fire of delay.

The reader will note that the FT used James Madison’s words calling American Debt as a curse (we covered it in an essay a couple of days ago). It seems VP Vance decided to kick it up a notch and calls the global acceptance of the USD a curse. Private Credit may be about to start getting interesting. The defaults are well telegraphed though so…maybe not.