Russian diesel deal: first 300,000 tonnes equal 14 hours of U.S. demand; diesel by state

The Treasury's Office of Foreign Assets Control (OFAC) issued Russia-related General License 135 on Friday, October 9, signed by its director, Bradley T. Smith. It authorizes transactions otherwise banned under two sets of Russia sanctions regulations that are "related to the sale, delivery, offloading, or importation, including importation into the United States, of diesel fuel of Russian Federation origin". It runs until 12:01 a.m. Eastern time on April 7, 2027. The U.S. has not imported Russian oil or gas since 2022, according to the EIA as cited by AP, so this is the first legal route for Russian diesel into the country since then.

The license has one exception: it does not authorize any debit to an account at a U.S. financial institution held by Russia's central bank, its National Wealth Fund or its Ministry of Finance. In practice, payments can't come out of the Russian state's frozen money in the U.S.

Moscow has so far authorized 500,000 tonnes. On October 10 the Russian government partly lifted its diesel export ban, effective that day, to allow "at this stage" 500,000 tonnes onto the world market, and told oil companies to start contracting with foreign buyers in coordination with the government. Russia had banned diesel exports by non-producers since January 31 and extended the ban to refiners themselves on July 9.

Not all of it is meant for the U.S. The President's post spoke of supplying "the American and global marketplace", and the Treasury described the license as allowing Russian diesel "to the global market". The U.S. is itself the world's largest diesel exporter: it shipped out 1.76 million barrels a day of distillates in the week to October 2, against imports of 118,000 barrels a day (EIA). The first 300,000 tonnes equal about a day and a quarter of U.S. distillate exports.

Against what Russia used to sell, it is a fraction. Russian diesel and gasoil exports averaged 850,000 barrels a day in the first quarter and 190,000 in the third, according to Vortexa data cited by Windward analyst Michelle Wiese Bockmann to Al Jazeera. The 500,000 tonnes now cleared work out at about 124,000 barrels a day if shipped over a month. The International Energy Agency says Ukrainian strikes have cut Russian diesel output by about 30% (AP), and Neil Atkinson, a former head of the IEA's oil markets division, told Al Jazeera that in the short term Russia could only deliver the promised volumes by taking diesel from its own domestic market.

Rises reach the diesel pump about five times faster than falls in the first week, a stronger version of the pattern we measured for gasoline. Unlike gasoline, though, diesel stations are not short of margin right now: the gap between the national diesel price and the previous week's Gulf Coast wholesale price was $1.47 on October 5, in line with its 2026 average of $1.45. So a lasting wholesale drop would likely pass through at the normal pace, with nothing held back to rebuild margins.

Diesel is short in a way gasoline isn't. Ukrainian drone strikes have knocked out Russian refineries, and Russia, until its export ban the world's second-largest diesel exporter after the U.S. (Al Jazeera), has had little to sell abroad, while the conflict with Iran has cut off refined products from the Persian Gulf. Supplies of refined products such as diesel are still only about half of their prewar level, Daniel Sternoff of Columbia University's Center on Global Energy Policy told AP. The result shows in the spot market: on October 2 a gallon of New York Harbor ULSD cost $2.34 more than the West Texas crude it is made from, against $1.07 for gasoline.

The license covers only diesel. Russian gasoline remains under U.S. sanctions, and Russia itself keeps its ban on gasoline exports until January 31, 2027 (EFE). Any effect on gasoline would come only through crude oil prices, and the deal adds no crude. That is why a gallon of diesel costs $1.94 more than regular at AAA today, against 57 cents a year ago and 87 cents in the EIA's survey of February 23, just before the war with Iran began.

U.S. stocks are thin. Distillate inventories were 105.1 million barrels on October 2, 16.4 million below a year earlier, even though U.S. refineries produced 5.17 million barrels a day of distillates over four weeks, more than a year earlier. Exports took 1.76 million barrels a day in the latest week. Low stocks make the price react faster to any news, including a political announcement, in both directions. Our red-dyed diesel guide covers the other relief measure for truckers and farmers, the federal penalty waiver of October 5.

Cheapest: Texas ($5.72), Georgia ($5.74) and North Carolina ($5.76), followed by Louisiana and South Carolina. The Lower Atlantic was the cheapest EIA region last week at $5.699, ahead of the Gulf Coast at $5.819. Most expensive: California at $8.39, then Washington ($7.28) and Hawaii ($7.26), with Nevada and Oregon above $6.75.

Two states set records today. AAA's highest-ever diesel averages for Colorado ($6.358) and Hawaii ($7.262) are both dated October 13. Colorado jumped 29.2 cents in a week, the biggest rise in the country; AAA does not give a reason, and Denver's EIA figures are on our Denver page. In 45 other states and D.C. the record dates from September, and today's price is up to 75 cents below it, about 20 cents in a typical state; in New York, Massachusetts and Rhode Island the record is still from May 2022.

North Carolina fell most, and not because of Russia. AAA's North Carolina diesel average dropped 23.9 cents in a week, after the state suspended its 41.2-cent tax on gasoline and diesel from October 10 to November 30. Ohio (−16.7¢), Utah (−13.1¢) and Michigan, Idaho and Wisconsin (all down more than 10¢) also fell. The Midwest, where farmers are bringing in the harvest, pays $6.29 on the EIA's figure. Our gas tax by state table shows each state's rates.