U.S. diesel prices reach record high amid Iran conflict, pushing up transport costs
Diesel averaged $5.85 per gallon, the highest on record, as the Iran war disrupted oil supplies, raising transport expenses for many consumer goods.
Diesel prices in the United States climbed to an average of $5.85 per gallon on Friday, the highest level recorded, as the conflict involving Iran tightened global oil supplies, according to data from the American Automobile Association. Gasoline also hit a seasonal record, averaging $4.14 per gallon.
The surge represents a 55% increase in diesel costs since the war began in late February, when Iran's actions threatened the Strait of Hormuz, a key route for about one-fifth of the world’s crude oil. Higher fuel costs are expected to raise transportation expenses for a range of products, from groceries to furniture, potentially leading wholesalers and retailers to pass some of the added costs to consumers.
Global crude oil prices were around $94 a barrel on Friday, well above the roughly $72.50 level seen before the conflict. Recent fighting escalated investor concerns, though prices eased slightly later in the day.
Analysts note that while the price impact on any single item may be modest, the cumulative effect across many goods could strain household budgets. The rise in diesel costs adds pressure to an inflation environment that remains above the Federal Reserve’s 2% target, with the annual rate at 3.4% in July.
Grocery price growth slowed in July, with modest declines in items such as cheese and candy, but prices for fruits, vegetables, beef, coffee, milk and rice stayed elevated. The combination of persistent inflation and a strong labor market has increased expectations of a possible interest-rate hike at the Fed’s September meeting.
"Inflation is running above our 2% target so the Fed's predominant focus right now should be on prices," Fed Chair Kevin Warsh said at a recent gathering in Jackson Hole.
"If the Fed gets inflation wrong and judges the economy wrong, who gets the worst of it? Not the financial high-fliers. Hard-working Americans are the ones left to deal with inflation that is too high or jobs that suddenly appear less secure," Warsh added.