The cost of keeping trucks, farm machinery and other diesel-powered equipment running in the United States has surged to unprecedented levels, with the national average price of diesel climbing above $6 per gallon for the first time.
The average price reached about $6.06 per gallon on Friday, according to data from AAA, marking a sharp increase from the same period last year. Truckers and farmers are now paying roughly 63 per cent more to fuel their vehicles and machinery than they did a year ago.
The impact is particularly severe in California, the country's largest agricultural state, where diesel has climbed to about $7.98 per gallon.
The surge comes as global crude oil markets react to disruptions linked to the wars in Ukraine and the Middle East. US crude oil futures moved above $100 per barrel on Thursday for the first time since May, with the contract gaining approximately 20 per cent in September.
While gasoline prices tend to attract greater attention from American consumers, energy analysts warn that rising diesel costs could have a broader impact on the economy because diesel powers much of the infrastructure responsible for moving goods and producing food.
“Diesel is the real lifeblood of the economy,” said Bob McNally, president of Rapidan Energy, during an interview with CNBC's The Exchange.
He noted that diesel powers the trucks, trains and ships that transport goods to consumers, as well as the machinery farmers rely on to plant and harvest crops. Diesel is also used for home heating and electricity generation in some parts of the country.
“It’s the more insidious, more costly, and more impactful fuel,” McNally said. “As we climb higher, it is a real concern.”
Patrick De Haan, head of petroleum analysis at GasBuddy, described diesel prices at current levels as a potential “silent killer” for the US economy.
The increase is already being felt by consumers. Higher diesel prices raise transportation and production costs, which can eventually be passed on through the prices of groceries, manufactured goods and energy.
De Haan also warned that gasoline prices were reaching unusually high levels for this point in the year. Retail gasoline prices hit a Labor Day record of $4.15 per gallon earlier in the week, adding to the pressure on household budgets.
Americans are now spending approximately $700 million more each day on gasoline and diesel than they were a year ago, according to De Haan.
“There’s sticker shock there for consumers,” he said.
Wars tighten global fuel supplies
The latest increase in diesel prices has been driven in part by disruptions to global fuel supplies stemming from the wars in Ukraine and the Middle East.
Ukraine has targeted Russian refineries, while Russia has responded by restricting diesel exports. At the same time, Iran and its Houthi allies in Yemen have attacked refineries and other energy infrastructure belonging to US Gulf allies.
Iranian attacks on tankers have also disrupted fuel shipments through the Strait of Hormuz, one of the world's most important energy routes.
The combined disruptions have placed additional pressure on an already tight global refining market.
Gary Simmons, chief operating officer of Valero, said during the US refiner's July 30 earnings call that the conflicts in Eastern Europe and the Middle East had taken approximately five million barrels per day of refining capacity offline.
Andy Lipow, president of Lipow Oil Associates, estimated in a Wednesday note that the world had lost nearly eight per cent of its diesel supply, with little spare refining capacity available to compensate for the shortfall.
Refiners have little room to increase output
The situation presents another challenge for the US government as policymakers attempt to contain the impact of higher energy prices on households and businesses.
Helima Croft, head of global commodity strategy at RBC Capital Markets, described the rising diesel costs as an “enormous challenge” for the Trump administration.
Croft pointed to the limited ability of US refiners to rapidly increase production, noting that refineries were already operating at extremely high utilisation rates.
“U.S. refineries are running at 98% utilization rates — there is just no spare capacity,” Croft said.
With diesel serving as a crucial input across transportation, agriculture, manufacturing and energy, analysts warn that sustained prices at current levels could extend well beyond the fuel pump, increasing operating costs throughout the US economy and putting further pressure on consumers.