Diesel Prices Soar, Creating Headwinds for Republicans Ahead of Midterms

Record-high diesel prices, driven by the escalating conflict in the Middle East, are creating significant challenges for Republican candidates as the midterm elections approach. The surge in fuel costs is directly impacting farmers, businesses, and consumers across the nation, fueling Democratic efforts to capitalize on economic anxieties.

Diesel fuel, essential for powering transportation and agriculture, has seen its price jump 73% since the beginning of the conflict in the Middle East, reaching an average of $6.52 per gallon. This increase is particularly acute for farmers, who rely heavily on diesel for their equipment. "A war has sent up the price of diesel," said Adam Hamilton, a Democratic Senate candidate in Kansas, relaying concerns from farmers who fear for the viability of their operations.

Republican politicians are grappling with the issue, with some calling for drastic measures. In key states like Iowa and Michigan, candidates have advocated for an immediate ban on U.S. diesel exports to increase domestic supply. Representative Ashley Hinton of Iowa stated, "Iowans are being squeezed and shouldn’t have to foot the bill at the pump or the checkout line for the war in Iran." Senator Chuck Grassley, also from Iowa, has become a vocal proponent of export controls, drawing parallels to restrictions on computer technology.

However, the proposed solutions have divided Republicans and drawn warnings from economists and energy industry groups. While former President Donald Trump has expressed support for halting exports, Energy Secretary Chris Wright indicated that a "blanket ban" is not under consideration. The American Petroleum Institute and several economists caution that banning diesel exports could worsen prices for consumers by creating a surplus of diesel at refineries, forcing them to reduce production of other essential fuels like gasoline and jet fuel.

"That will result in Americans taking a one-two punch for food and fuel prices that just don't stop," warned Joseph Brusuelas, chief economist for RSM, highlighting the potential for inflation across various sectors. He added that such a move could damage the global diesel supply chain and significantly increase the chances of a global recession.

The current price spike is attributed to a confluence of global events. The Middle East, a major supplier of crude oil for diesel refining, has seen its production disrupted by conflict. The closure of the Strait of Hormuz during the war removed a significant portion of the world's oil supply. Additionally, Ukrainian attacks on Russian refineries have further reduced the global availability of diesel fuel.

"These attacks have been pretty prominent," said Debnil Chowdhury, who leads the fuels and refining team at S&P Global Energy. "If there is a way to a peace deal or a peace agreement announcing that there will be no more attacks on Russian refineries, on Middle Eastern refineries ... that would obviously make the largest impact on the underlying price."

Economists also point to the long-term consequences of enacting export bans. Phil Verleger, an energy economist, warned that such policies could lead other countries to seek more reliable suppliers, potentially diminishing the U.S. fossil fuel industry's global standing, similar to the impact of a 1973 soybean export ban that shifted global reliance to Brazil. Despite the economic risks, Verleger acknowledged the political pressure to act, noting, "If I were an elected politician, I'd do it."