Starting in first gear
Good morning. Brent crude settled at $102.25 on Friday, diesel set an all-time record of $6.53 a gallon two weeks ago, and the car on today's Auction Desk is a 7.4-liter V12 that runs on premium. We didn't plan the timing, but we're not going to waste it.
Today is a fuel issue from top to bottom: the car, the chemistry in your tank, the war setting the price of it, and the bill that lands on everyone from a Connecticut commuter to a trucker in Chile.
In today's newsletter, we'll get into:
Auction Desk: A 1997 SL600 that RENNtech bored and stroked to 7.4 liters, bid to $100,000 and closing this afternoon.
One Big Story: Why diesel, not crude, is now the expensive part of the oil crisis.
Engineer's Corner: Diesel versus gasoline, and what the octane number on the pump measures.
Garage Economics: Who pays for $100 oil, here and abroad, and what can be done about it.
Let’s roll.
THE AUCTION DESK
RENNtech's 7.4-liter SL600 is at $100,000 and closes this afternoon
This 1997 SL600 got RENNtech's SL74 package in 1998 and is now on Bring a Trailer through a Miami dealer: Brilliant Silver over two-tone gray leather, 18k miles shown, both tops, and 18-inch OZ wheels. Bidding stood at $100,000 on Sunday, and it closes today at 2:52 PM Eastern.
Who RENNtech is. Hartmut Feyhl spent about 12 years at AMG, including work on the W124 "Hammer," then founded RENNtech in Florida in 1989.
What the package does. RENNtech took the stock 6.0-liter M120 from an 89 mm bore and 80.2 mm stroke to 91 mm and 95 mm, about 7.4 liters. This car's 1998 invoices add bigger cooling, an upgraded five-speed automatic, Alcon brakes, suspension work, and no speed limiter. The invoice lists 506 horsepower, below the 575 often quoted for the package and well above a stock SL600's 389.
The paperwork. The Carfax flags a mileage inconsistency from a 2025 service in Quebec, likely clerical. I grew up in Windsor, and my guess is kilometres typed into a miles field. The Texas title is a certified copy with an "Exempt" odometer reading, which is normal for a car this age.
My call: this finishes between $108,000 and $118,000. The paperwork holds the ceiling down, and the reserve is close to a coin flip.
📈 Market signal: Low-mile stock SL600s have sold at auction from the high $20,000s to about $47,000 this year. A 33k-mile 1997 SL74 sold on BaT for $95,000 in December 2021, then was bid to $108,500 elsewhere a year later without meeting reserve. At $100,000, bidders are already paying about $55,000 to $70,000 for RENNtech's work.
ONE BIG STORY
Why diesel, not crude, is now the expensive part of the oil crisis
On Friday, Brent crude settled at $102.25 a barrel and the U.S. benchmark, WTI, at $91.11. Those are high numbers, but they are well below the roughly $126 Brent touched intraday in late April. The part of the market setting records is diesel. AAA's national average hit an all-time high of $6.53 a gallon on September 22 and stood at $6.36 on Saturday, about a dollar more than premium gasoline and nearly $2 more than regular.
How we got here. The U.S. and Israel began strikes on Iran on February 28. Before the war, about 20 million barrels a day of oil and fuel, roughly a fifth of world demand, moved through the Strait of Hormuz on around 125 large commercial ships a day. Since then Iran has required ships to get permission and pay transit fees, and attacks on tankers have come in waves. Brent went from about $70 at the end of January to its April peak, fell to $73.74 on June 24 as tankers began moving, and climbed again with each new round of strikes. On September 28 it neared $108 after the White House rejected an Iranian proposal to reopen the strait within seven days.
Why diesel, and not crude. Crude has found partial workarounds: pipelines that bypass the strait, U.S. Navy escorts, and record U.S. exports. How much is getting through is disputed. The Energy Secretary cited a single day of more than 17 million barrels at the end of August, while Rystad Energy's chief economist said observed exit volumes during the war have mostly run between 4 and 6 million barrels a day. The vessel count is clearer: 132 transits in the week of September 21 to 27, about what used to pass in a single day.
Refined fuel has fewer workarounds. The Gulf exported about 4 million barrels a day of refined products before the war; in September it was shipping at least 1 million, about a quarter of the old level. Russia has barred diesel exports since July while Ukrainian drones keep hitting its refineries; Kyiv said Friday it struck facilities in the Samara and Volgograd regions. Chinese refiners suspended product exports for October last week, which, along with reports of more U.S. forces heading to the region, pushed Brent up $4.28 on Thursday. Europe, short of diesel for years, was getting about half of its diesel imports from the U.S. by August, and Europe's diesel premium over crude went above $95 a barrel in late September, a record in data going back to 2011.
The response so far. In March, IEA members agreed to release a record 400 million barrels from emergency stocks, with a U.S. share of 172 million. The Strategic Petroleum Reserve held 283.8 million barrels in late September, its lowest level since 1982 and less than 40% of its 714-million-barrel capacity. On Friday the G7 announced a coordinated release of another 100 million barrels through the IEA over four months, with a large share of diesel front-loaded into the first 20 days. The White House also spent two weeks weighing a ban on U.S. diesel exports. The Energy and Interior secretaries argued against it, and on Friday the president said he would not impose one.
What to watch this week:
Hormuz transit counts. A move from about 130 a week toward several hundred would do more for prices than any reserve release.
The G7 diesel. Whether it reaches the market inside the promised 20 days.
China's November decision on fuel export quotas.
Pump prices into the November 3 midterms, which is what kept the export-ban idea alive in the first place.
The takeaway: Crude has partly found its way around Hormuz, and refined fuel has not. The G7 release averages about 820,000 barrels a day over four months, against a Gulf product-export shortfall that has run as high as 3 million barrels a day. Until the strait reopens fully or Gulf and Russian refining recovers, expect diesel to keep pricing above premium.
ENGINEER’S CORNER
Gasoline and diesel come out of the same barrel. At the refinery, crude is heated and separated by boiling point. Gasoline comes off the lighter end: molecules of roughly 4 to 12 carbon atoms that boil between about 30°C and 200°C. Diesel comes from the middle of the barrel, roughly 10 to 20 carbons boiling between about 180°C and 360°C, the same neighborhood as jet fuel and heating oil. Diesel is denser, and a gallon of it carries about 137,000 Btu against about 120,000 for ethanol-blended gasoline, roughly 14% more energy.
Two ways to light a fire. A gasoline engine mixes air and fuel before ignition and lights the mixture with a spark. A flame front then travels across the chamber. The engine's enemy is the unburned mixture ahead of that flame, which is being squeezed and heated as the flame advances. If it ignites on its own before the flame arrives, you get knock: a sharp pressure spike that hammers pistons and ring lands. That's why gasoline compression ratios stay roughly between 10:1 and 14:1. The stock M120 in today's Auction Desk car runs 10:1.
A diesel compresses air alone, at ratios of roughly 15:1 to 20:1, which heats it to several hundred degrees Celsius. Fuel is then injected at pressures that reach about 2,500 bar in modern common-rail systems, and it ignites on contact with the hot air. Combustion that would count as knock in a gasoline engine is the whole design. With no spark to time, a diesel controls power by how much fuel it injects, so it needs no throttle plate and always runs with excess air. Higher compression and the absence of throttling losses are the main reasons a diesel covers more miles per gallon than a comparable gasoline engine, before the extra energy in each gallon is even counted.
What octane measures. Octane is resistance to self-ignition. It is not a measure of energy or quality. The scale is set by two reference fuels: iso-octane, which resists knock well, is 100, and n-heptane, which knocks readily, is 0. The number on a U.S. pump is the Anti-Knock Index, the average of two lab tests called Research and Motor octane. That's why American pumps read 87, 89, and 91 to 93, while European pumps show 95 and 98 on the Research scale alone. Premium contains no more energy than regular. It lets an engine run more compression, more boost, or more spark advance before knock sets in.
So read the fuel door or the owner's manual:
Premium required: use it. High-compression and turbocharged engines are calibrated around it.
Premium recommended: the knock sensor will pull timing on regular, and you give up some power and a little efficiency.
Regular specified: premium buys nothing.
Cetane, the mirror image. Diesel is rated by cetane number, which measures how readily it ignites under compression, so higher is better. The U.S. minimum is 40 and Europe's is 51. That's also why the fuels can't be swapped. Gasoline in a diesel won't ignite reliably and lacks the lubricity the high-pressure pump depends on. Diesel in a gasoline engine resists the spark and smokes its way to a stall.
Why diesel costs more today. Diesel and jet fuel compete for the same middle slice of the barrel, and a refinery can only shift its yield so far. The fuel that moves trucks, ships, tractors, and generators has few substitutes. Federal excise tax is also 24.4 cents a gallon on diesel against 18.4 cents on gasoline. In a supply shock that lands on refineries, diesel is the first fuel to run short.
The takeaway: Octane measures how well gasoline resists lighting itself, and cetane measures how readily diesel does. Neither one is a measure of energy. Buying more octane than your engine was built for adds cost without adding power.
GARAGE ECONOMICS
Who pays for $100 oil, and what can be done about it
The U.S. is cushioned, not protected. The United States produces more oil than any other country and is the world's largest diesel exporter. That helps at the crude level: WTI settled $11.14 below Brent on Friday. It helps much less at the pump, because a Gulf Coast refiner can sell a gallon of diesel to Rotterdam or Santiago, and American buyers have to match that price to keep it here. Regular averaged $4.38 on Saturday ($4.46 in Connecticut), up about $1.23 from a year ago. Diesel was $6.36, up about $2.65.
What that means in practice:
A typical driver covering 13,500 miles a year at 25 mpg pays about $660 more a year for regular.
A long-haul truck at 6.5 mpg and 100,000 miles pays roughly $40,000 more a year for diesel, and that ends up in the price of everything it delivers.
Farmers face the same math at harvest, which is why farm-state lawmakers pushed hardest for a diesel export ban.
Producers and exporting refiners come out ahead, since they sell at world prices.
The rest of the world pays more. Importers carry the heaviest load. Asia takes most of the oil that normally moves through Hormuz; the Middle East supplied 57% of China's seaborne crude imports last year. Economies that lean on Chinese fuel exports are exposed every time Beijing pauses them, as it did again for October. Countries that buy fuel in dollars while their own currencies weaken pay twice. Europe has refineries but not enough diesel, and higher diesel and fertilizer costs push up food prices, which hits poorer countries hardest. The IMF has cut its 2026 global growth forecast to 3.0% and estimated that oil averaging around $100 would pull it toward 2.5%. Its severe case, with disruptions running into 2027, is about 2%, which the fund called a close call for a global recession. Its next outlook arrives this month.
What can be done. Every option has a cost.
Release stockpiles. Effective for weeks, but the SPR is down to 283.8 million barrels, with a practical floor for safe operations reported near 250 million.
Restrict exports. A diesel export ban would lower U.S. prices briefly, then push refiners to cut runs and send world prices higher. That argument carried the day for now.
Add supply. Most of OPEC's spare capacity sits in Saudi Arabia and the UAE, on the wrong side of the strait. U.S. shale responds over quarters, not weeks.
Reopen the strait. The only fix at full scale. Goldman Sachs' downside case, not its base case, has Brent above $120 next year if Gulf output stays 4 million barrels a day below pre-war levels.
What you can do. Buy the octane your manual requires and nothing higher. If you're weighing a diesel pickup, diesel now costs about 45% more per gallon than regular, so it needs about 45% better mileage than its gasoline twin just to break even per mile. Real-world gaps are usually smaller.
The takeaway: The U.S. produces enough oil to soften this shock but not enough to escape it, because fuel is priced on the world market. Reserve releases and export rules can hold prices down for weeks at a time. A lasting drop needs Hormuz traffic back near pre-war levels.
🏁 THE COOL-DOWN LAP
The Rolls didn't sell. Friday's 8k-mile 2013 Phantom Drophead Coupe was bid to $226,000 and did not meet reserve. My printed call was $225,000 to $245,000, so the bidding landed inside the range and the seller's number sat somewhere above it.
The fuel-economy rules go to court. A coalition of states and cities sued federal agencies last week over the weaker fuel-economy standards we covered in #30. With regular at $4.38, expect that case to get more attention than it would have in February.
Jaguar Type 01 reveals tomorrow. The watch-number from #28 arrives Tuesday, October 6, in New York: a four-door electric GT with three motors and close to 1,000 horsepower, and the first new Jaguar since the brand stopped selling its old lineup in the UK in 2024.
The SL74 result leads Wednesday's Cool-Down. My number is $108,000 to $118,000.
That's a wrap. See you Wednesday — same inbox, lower gear.
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