Most CEOs I work with do not buy diesel.
They run software companies, professional services firms, specialty manufacturers, healthcare practices. When they see headlines about refining margins, they file it under “energy sector problem” and move on. This week, I think that is a mistake.
Torsten Slok, chief economist at Apollo Global Management, published a short note on Wednesday that highlights one remarkable number. In August, the spread between the price of diesel and the crude oil it is refined from, what traders call the crack spread, went above $100 a barrel on the U.S. Gulf Coast for the first time on record. The normal range is $15 to $30. S&P Global reported this week that the spread remains near record levels.
Slok’s concern is what happens after diesel gets expensive. Diesel underlies freight, rail, agriculture, construction and much of the physical economy, so higher diesel costs work their way through supply chains and eventually into the prices of goods and services. In ot…