Editor’s Note: The fuel price surge Nathan describes — diesel topping $6 a gallon, jet fuel up 84% in a year — is one side of a broader energy repricing story. Our colleague Robert Rapier, Chief Investment Strategist of Utility Forecaster, has been tracking another chapter: the essential-service companies supplying electricity to the grid that AI data centers run on. He says the setup is structural — and still early. See what he’s watching now →

$4.79 per gallon.

That’s the price of regular unleaded gasoline in Salt Lake City. My son just flew out there yesterday. When I asked about his trip, the first thing that caught his eye wasn’t the majestic Wasatch mountains, but the price of gas outside the airport.

It could be worse. Just ask diesel drivers. A year ago, diesel averaged $3.69 per gallon. But it has since shot through $4, $5, and now $6 per gallon… peaking at $6.29 this week. Prices have spiked more than 30% over the past three months alone.

Keep in mind, these are just national averages. Higher-priced states like California are now running above $8 per gallon. There are even a few reported instances of fuel stations hitting their maximum advertised price of $9.99 – digital pumps and signs aren’t equipped to display another digit.

This would make good fodder for late night talk show hosts, if the situation wasn’t so dire. Rising fuel costs have become a gusty headwind for many industries, particularly the airline group.

You think your credit card takes a hit at the pump? Try filling up a Boeing (NYSE: BA) 737. The aviation workhorse holds about 44,000 pounds (7,000 gallons) of jet fuel. At current wholesale spot rates, that’s about $30,000 – for a single flight.

Southwest Airlines (NYSE: LUV) has 800 of these aircraft in its fleet, making about 4,000 departures daily.

According to the Bureau of Transportation, domestic airlines burned 1.62 billion gallons of jet fuel during the Month of May at an average cost of $4.09 per gallon. That adds up to a whopping $6.6 billion, versus $3.6 billion in May 2025 — an 84% surge.

Some airlines utilize hedging contracts as a protective insurance policy. And higher fuel expenses can be passed along to ticketed passengers through rising fares… but only up to a point. And that can weaken demand.

Newer jets are more fuel efficient that ever. Delta (NYSE: DAL) can fly 1,000 seat miles on just 14 gallons. Still, with cost per available seat mile (CASM) outpacing passenger revenues per available seat mile (PRASM), operating margins have taken a hit.

Of course, cruise lines are in the same boat (no pun intended). Despite record revenues and strong advance bookings, Carnival (NYSE: CCL) stock has just sunk to a 52-week low. Trucking companies are also struggling, recouping only a portion of the added expense through fuel surcharges.

My colleague Robert Rapier provided some insightful commentary on all this a few days ago. While investors can always underweight vulnerable sectors, I’m more worried about the broader inflationary spillover.

Consumer goods don’t magically appear on store shelves, and transportation costs are always reflected in the final price tag. I’m not just talking about discretionary items (such as electronics and appliances), but basic necessities.

Like food. The agri-business sector is highly sensitive, considering tractors, harvesters and other heavy machinery run almost exclusively on diesel.

As we know, the ongoing conflict in the Middle East has driven benchmark oil prices into triple-digit territory. In turn, gasoline prices have risen by about 33% over the past year. But diesel has climbed 66% — twice as much.

Some of that gap is caused by higher federal excise taxes. The rest comes from refining fundamentals. For starters, the same barrel of crude oil feedstock yields less diesel (12 gallons) than gasoline (20 gallons). Refineries also need specialized equipment to remove sulfur and other impurities to comply with environmental standards.

Even before the Iran war started, diesel refining capacity was under attack (literally). Ukrainian drones hit Russian refineries, forcing Moscow to ban diesel exports. That alone withdrew about 1 million barrels per day from the global supply stream.

That’s just one reason why crack spreads (the profit from converting a barrel of oil into an equivalent amount of refined petroleum products) are currently much wider for diesel than gasoline. About $105 per barrel and $50 per barrel, respectively. You can see the price differential at any filling station.

But what consumers seldom see is the hidden cost needed to move intermodal freight from manufacturer to consumer. River barges run on diesel. So do most railroads. And trucks.

And the situation might get worse before it gets better.

Just this week, Iran-sponsored Houthi rebels struck a major pipeline in Saudi Arabia that normally carries 4 million barrels a day to a key coastal port on the Red Sea. Ironically, this conduit was built in the 1980s during the Iran-Iraq war as a backdoor in case the Straight of Hormuz closed, proving access to European markets northward through the Suez Canal or Asia southward through the Bab el-Mandeb straight.

Now, Houthi militia are threatening the Bab el-Mandeb, dropping the flow from 3 million barrels a day to practically nothing.

Here in the U.S, distillate (chiefly diesel) inventories sank to 103 million barrels at the end of last month. That’s well below seasonal norms and the lowest for this time of the year since record-keeping began in 1982. Refineries can’t just ramp up production – they’re operating at 97.4% of capacity.

It’s a pretty good time to be an upstream energy producer. The S&P Oil & Gas Exploration & Production (NYSE: XOP) has delivered a healthy 50%+ gain so far this year. But on the back of record-high crack spread margins, the Van Eck Oil Refiners (NYSE: CRAK) has soared 75%.

The pure-play portfolio holds domestic refiners like Valero Energy (NYSE: VLO), as well as international names like Turkiye Petrol. Even if a peace accord is reached with Iran, these incumbent leaders should have the wind at their back for years to come. Between engineering, permitting and construction, there is a long and costly (10 years, $10 billion) lead time to build a new refinery.

I view the fund as a good hedge against further geopolitical instability.

The refiners Nathan profiles — riding wider crack spreads as refinery capacity strains against demand — represent one way to position in this energy crunch. But our colleague Robert Rapier’s research points to a different corner of the same story: the essential-service companies that supply electricity, not just the fuels that power trucks, ships, and aircraft. With AI data centers now adding a historic new layer of electricity demand on top of an already-strained grid, those overlooked utility and infrastructure names are being repriced in the same way diesel refiners were before anyone noticed the inventory lows. Rapier says the setup is generational — and still early enough to matter. Here’s his full analysis →