Trump's red-diesel order roils truckers and diesel markets as diesel hits record highs

## Key Takeaways - **No refined fuels/refining content**: This transaction is entirely upstream/midstream (Bakken and DJ Basin crude oil gathering, processing, and transportation), with zero mention of refinery throughput, utilization rates, crack spreads, RIN/LCFS exposure, or renewable diesel/SAF economics. - **Midstream cost structure improvement**: Chevron expects ~50% reduction in Bakken unit midstream costs via extended/improved commercial terms with Hess Midstream, which could support sustained or increased upstream crude volumes feeding into downstream/refining systems, but no explicit production or barrel guidance is given. - **Capital allocation signal**: Chevron receives $200 million cash and offloads ~$3.7 billion of Hess Midstream debt (via deconsolidation) in exchange for giving up its GP/ownership stake in Hess Midstream and its DJ Basin crude midstream assets — a deleveraging/portfolio-simplification move rather than a refining capacity or margin-related action. - **One-time financial hit**: Chevron will recognize an estimated $3–4 billion after-tax loss at closing (treated as a special item), reflecting inability to capitalize future midstream cost savings — this is a balance-sheet/earnings event, not a signal on refined product supply or demand. - **ROCE accretion, not volume guidance**: The deal is expected to be accretive to return on capital employed by 0.5% (absolute), framed around capital efficiency in upstream/midstream operations rather than any change to refined fuels output, utilization, or margin capture. - **Timing**: Expected close by year-end 2026, pending regulatory approval and customary conditions — no near-term operational disruption flagged for crude supply to refineries. ## What It Signals for Fuels Markets This is a midstream/upstream restructuring with no direct bearing on refined fuels markets (no throughput, margin, RIN/LCFS, or SAF/renewable diesel data disclosed); its only indirect relevance is that lower Bakken production costs could support continued crude feedstock availability from the Bakken into North American refining systems over time.

## Fuel-Segment Takeaways — Costco 10-K (FY2026) - **Station count & sales mix:** Costco operated 774 gas stations at FY2026 year-end; gasoline represented 11% of total net sales for 2026. - **Gasoline price/volume impact on net sales:** Higher gasoline prices positively impacted net sales by $3,501M (130 bps), driven by a 12% increase in average price per gallon. Gasoline volume growth of 7% added a further $1,913M (71 bps) to net sales. - **Growth driver in warehouse ancillary:** Sales in warehouse ancillary and other businesses (led by gasoline and pharmacy) rose $10,199M, or 20% — outpacing core merchandise category growth of 8%. - **Margin dynamics:** Gasoline (and pharmacy) drove a 19-bps positive contribution to gross margin percentage within warehouse ancillary/other businesses, but gross margin in this segment *as a percentage of its own sales* fell 14 bps, "primarily due to gasoline and pharmacy" — reflecting gasoline's inherently lower margin profile and sales-mix dilution as it grew faster than core categories. - **Strategic/structural commentary:** Management reiterates that gasoline "generally has a lower gross margin percentage and lower SG&A expense" than non-gasoline business, and that rising gasoline prices inflate net sales (pressuring gross margin % on a consolidated basis) while reducing SG&A as a % of net sales — with the inverse true in a declining price environment. Co-branded credit card reward costs tied to higher gasoline sales also modestly pressured core category margins. - **Climate/regulatory risk flagged:** Risk factors cite exposure to climate-related regulation and the transition to low-carbon/alternative-fuel vehicles as a potential headwind to gasoline demand and compliance costs. **Signal for fuels markets:** Costco's results confirm gasoline retailing remains a high-volume, low-margin traffic driver whose profitability is highly sensitive to pump-price inflation/deflation (margin dilution vs. SG&A leverage trade-off), with the retailer's continued station footprint and volume growth (+7% gallons) suggesting resilient consumer fuel demand even as long-term EV/regulatory transition risk is explicitly acknowledged.