Diesel prices have surged to record-breaking levels, imposing an estimated $350 surcharge on the average American household, according to a Brown University tracker.
As of September 10, the average price for a gallon of diesel stood at $5.98, approximately $2.31 higher than in late February. This increase is partly attributed to the conflict involving Iran, which has largely closed the Strait of Hormuz, a vital shipping route for 10 percent of global seaborne diesel. California has seen even steeper prices, reaching $7.91 per gallon.
While most Americans do not purchase diesel fuel directly, its elevated cost permeates the economy. Diesel powers the trucks and ships that transport a vast array of goods, embedding these higher expenses into the prices consumers see for everything from milk to lumber. This situation echoes the price spikes seen in 2022 following Russia's invasion of Ukraine, when diesel reached $5.82 per gallon.
"Early on, much of the cost increase gets absorbed along the supply chain through existing freight contracts and retailer margins," David Ortega, a professor of food economics and policy at Michigan State University, told the Associated Press. "But as contracts reprice and fuel surcharges take hold, more of that cost makes its way to the grocery store."
The total impact of rising diesel prices on U.S. consumers has reached an estimated $46 billion. Although this is slightly less than the $55 billion impact from gasoline price increases, the 61 percent jump in diesel costs has significantly outpaced the 41 percent rise in gasoline prices.
"Diesel right now is caught up in more of a geopolitical turmoil than gasoline," said Patrick De Haan, head of petroleum analysis for GasBuddy. In addition to the conflict in the Middle East, escalating attacks on Russian oil refineries by Ukraine have also contributed to upward price pressure. Russia's reduced role in global supply, coupled with U.S. refineries operating at full capacity, has limited the ability to offset the shortfall. Domestic diesel inventories are at their lowest level since 1982, according to data from the Energy Information Administration.
"We’re entering a key period for diesel consumption with the lowest inventories on record for early September," David Russell, global head of market strategy at TradeStation, told Reuters. "Farmers and truckers typically use more diesel in the autumn, which raises the stakes for the current crisis and increases the risk of sharper price increases."
Winter Heating Costs
The upcoming winter months are expected to exacerbate the situation, as heating oil is essentially diesel fuel. Households relying on heating oil could face unprecedented bills. This concern is amplified by proposals to eliminate the Low Income Home Energy Assistance Program (LIHEAP), which provides financial aid for fuel costs.
"If you’re in the Northeast, then this is much more burdensome than anywhere else in the country," Mark Wolfe, executive director of the National Energy Assistance Directors Association, told Axios. "Families are getting hit by both gasoline and heating oil."
These escalating costs arrive as the midterm elections approach, a period when the economy is a significant factor for voters. While fuel prices are often a secondary consideration, experts suggest this year could be different, particularly in colder states that depend on fuels other than natural gas.
Even if the ongoing conflicts were to resolve immediately, it would take weeks or months for fuel prices to stabilize and diesel supply chains to recover. "After both of those are solved, then once the flow normalizes, that will start to help global inventories recover," De Haan noted. "Only after inventories have recovered do diesel prices really see a full decline."