The news: IEA members are speeding up their emergency oil release, including more than 20 million barrels of diesel, about five days of US demand.
Implications:
Fuel budget: Don’t count on this release to lower the diesel price in your 2027 freight bids.
Surcharges: Your fuel surcharge follows the weekly US diesel average, so any relief shows up within a week or two of the pump.
Exposure: You can cut fuel exposure without waiting on reserves. UNFI hedges its diesel, and other shippers are moving freight from truck to rail.
The News
The International Energy Agency is speeding up its emergency oil release and wants more than 20 million barrels of diesel on the market “as soon as possible,” its Governing Board said. The board also urged countries that produce and refine oil to raise supply, especially of diesel. The US Energy Department said more diesel-focused releases are under review and in progress.
The diesel is part of the record 400 million barrels that IEA members pledged in March after the Iran war began, so the move speeds up barrels members already promised and adds none. About 330 million of those barrels are already out, and members are now being asked to deliver the remaining 100 million or so faster. That adds up to more than the original pledge because some members are releasing more than they promised.
Why It Matters
This release won’t bring diesel down much. It covers about five days of US demand, and the IEA expects the shortage to last well into 2027. This means fuel surcharges are likely to stay high while shippers set their 2027 freight budgets.
Zoom In
The 20 million barrels equal slightly more than five days of US consumption, while disruptions in the Middle East and Russia cut diesel and gasoil exports by about 1.3 million barrels a day in September, according to the IEA. That means the release would make up for about two weeks of lost exports, by our math.
Diesel futures fell a little more than 1%, to $4.86, on the day, and Abhishek Kumar, an analyst at Sparta Commodities, said the barrels “appear to be an acceleration of existing commitments rather than genuinely new volumes.”
The bigger problem is refining. The IEA warns the diesel shortage could last well into 2027, and Andy Lipow of Lipow Oil Associates said the release does “not solve the basic problem which is how to increase production at refineries.”
What It Costs
US diesel averaged $6.18 a gallon in the latest weekly reading from the Energy Information Administration, 35 cents below the record of $6.53 set in September but $2.51 above a year ago.
That weekly number feeds straight into fuel surcharges. FedEx sets its ground fuel surcharge off it, with a short lag, and truckload fuel tables work the same way, so any relief from the release would reach freight bills within a week or two.
For example, take a truckload fuel table that assumes a truck gets 6 miles a gallon. Every 6 cents that diesel falls cuts the surcharge by 1 cent a mile, so the 35-cent drop from the record is worth almost 6 cents a mile, or about $29 on a 500-mile load, by our math.
Peer Insights
Three moves we’ve seen recently on high diesel costs:
Locked in the price: UNFI hedges its diesel to keep its “exposure in a reasonable place,” CEO Sandy Douglas said. The trade-off: if prices drop, it misses the savings.
Cut the miles: UNFI uses Samsara to track about 2,000 delivery vehicles and trim miles driven.
Moved freight to rail: Shippers are shifting freight from truck to rail, Union Pacific said. Intermodal runs about 30% below truckload, and J.B. Hunt says a 10% to 15% saving is usually enough to switch a lane.
What’s Next
Every Monday: the EIA posts the weekly diesel average that fuel surcharges follow, so each reading shows whether the release is reaching the pump.
Early November: if members follow the G7’s 20-day plan, they would supply about 1 million barrels a day for about three weeks, which runs into early November.
Further steps: the IEA says it will bring G7 leaders more recommendations focused on diesel.
Dig Deeper
The decision: the IEA Governing Board statement and its October oil market report.
Truck to rail: our piece on Union Pacific and the diesel-driven shift to intermodal.
