U.S. diesel prices approach $6 per gallon amid global supply constraints
Diesel prices in the United States have risen 61% over the past year, nearing $6 a gallon as geopolitical tensions and refinery outages tighten supply, prompting concerns about downstream cost impacts for consumers.
The national average price of a gallon of diesel reached $5.98 on Thursday, up 61% from a year earlier, according to AAA data. The increase brings the fuel close to the $6 per-gallon mark, a level not previously seen in the United States. Diesel is a key input for trucking, rail, construction and farming, so higher costs are expected to affect the price of goods transported across the country.
"Higher diesel prices are something that households are going to have to weather at least over the remainder of this year," said Thomas Ryan, senior North American economist at Capital Economics.
The Department of Labor reported that more than a third of the rise in producer-price inflation for August was linked to diesel, which climbed 24.1% that month. Analysts note that the surge is driven by a combination of geopolitical factors, including the ongoing conflict between the United States and Iran that has limited global oil supply, and repeated Ukrainian drone strikes on Russian refineries that have reduced Russia’s refining capacity.
"There's just not enough diesel right now in Russia to export any volume of it, and that's unfortunately a big problem for a global economy that sees almost every piece of heavy machinery needing diesel," said Patrick De Haan, petroleum analyst at GasBuddy.
Supply constraints have also kept diesel price gains ahead of gasoline, which is hovering above $4.28 per gallon. S&P Global Energy expects global oil production to remain below pre-war levels through at least 2027.
While retailers have so far absorbed higher diesel costs through existing contracts and margins, experts warn that prolonged price pressure could lead businesses to add fuel surcharges, passing costs to consumers. Potential downstream effects include higher prices for refrigerated foods that travel long distances, as well as increased expenses for items such as furniture and vehicle destination charges.
"If you're shopping for furniture, that is going to see a big, expensive increase. If you're shopping for a new car, those destination charges could shoot up," said De Haan.
The situation underscores the broader economic ripple effects of elevated diesel prices on American households and businesses.