Energy Crisis Spreads from Crude Oil to Diesel and Food, Global Inflation Faces Second Round of Pressure

On September 21, the pressure in the global energy market is extending from crude oil prices to a broader range of refined oil and food supply chains. The retail price of diesel in the United States has surpassed $6.50 per gallon for the first time, significantly widening the gap from gasoline, which is about $2. This reflects that the current shortage is not just crude oil, but also refining capacity, refined oil inventories, and transportation capabilities. Conflicts in the Middle East are compressing energy transport through the Strait of Hormuz, while the Russia-Ukraine conflict continues to impact Russian refining facilities, simultaneously shrinking diesel supply from both ends, causing costs to begin transmitting to freight, agriculture, food processing, and industrial equipment.

More notably, a second inflation chain is forming in the Black Sea. Russia and Ukraine are significant sources of global wheat supply, and after ports, grain terminals, and transportation have been disrupted, some importing countries are forced to turn to the United States, Europe, and other alternative sources, leading to increased transportation distances and costs. This means that beyond energy prices, food and agricultural input costs may also become new sources of price increases; if diesel, fertilizers, and food prices rise simultaneously, corporate costs are more likely to evolve from a one-time energy shock into broader inflationary pressures.

This also complicates the environment for U.S. monetary policy. Kashkari pointed out that inflation is no longer just an oil price issue, as price pressures in the service sector have also spread; if energy and logistics costs continue to transmit to core goods and services, even if crude oil prices fall in the future, the pace of disinflation may still be slower than expected. On the other hand, the IMF warns that the global public debt ratio could rise to 100% of GDP by 2029, with high interest rates, energy shocks, and increased fiscal spending further raising government interest burdens and compressing policy space.

Therefore, the current market needs to focus not just on a single oil price indicator, but on whether energy, transportation, and food are forming a second round of cost transmission. If Middle Eastern shipping, Russian refining, and Black Sea grain exports do not improve, diesel and food prices may form new sources of inflation beyond crude oil, forcing major central banks to maintain more restrictive policies; for high-debt economies, this will also mean higher financing costs and more limited fiscal buffers, making the policy trade-offs faced by the global economy even more challenging.

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