Diesel costs more than $6 a gallon for the first time. Here’s how that impacts you
The price of diesel, the workhorse fuel that powers the world economy, topped $6 a gallon Friday for the first time ever.
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The price point may be invisible to most American drivers but will likely lead to higher costs for most things consumers buy.
The national average is $6.06 a gallon, according to the latest reading from AAA, up 8 cents in just the last week. Last Friday, prices first broke the previous record of $5.82 a gallon set in June 2022 after Russia invaded Ukraine.
Diesel costs have risen more than 55% since the start of the war with Iran, outpacing the 40% jump in gasoline prices. In fact, diesel is on track for easily the biggest annual percentage increase on record, according to a CNN review of AAA data.
The problem is two-fold: First, oil futures have surged back above $100 a barrel as the war with Iran drags on.
Second, there are not enough refineries operating to turn that crude into fuel.
Refineries in the Middle East and Russia have been damaged by war. Russia, a major source of diesel, has limited its exports to fight fuel shortages at home. China, seeking to avoid shortages of its own, has also restricted its exports.
Gasoline gets most of the attention when fuel prices rise. Only about 3% of passenger cars on American roads run on diesel. However, diesel powers nearly everything else — trucks, tractors, freight trains, boats and construction vehicles.
Almost all heavy trucks and freight trains run on diesel, which transport virtually all the goods Americans buy for their homes. Major trucking companies and freight railroads pass on increased costs to their customers — like retailers and manufacturers — via a fuel surcharge. Those businesses may then raise prices to offset the costs.
On the West Coast, where the average price for diesel in California stands at $7.98 a gallon, the nation’s largest ports in Los Angeles and Long Beach are about to get a flood of containers for the holiday shopping season. Transporting them to retailers will cost more this year, which could be passed along to shoppers.
Patrick De Haan, head of petroleum analysis at GasBuddy, said diesel could “blow past” $8 a gallon in California. “Some pumps aren’t even built to display what could come next,” he said in a post on X.
The spike in fuel prices also comes just as the fall harvest season gets underway. Diesel is a key fuel used in farming equipment, and higher input costs could lead to higher food prices.
Goldman Sachs warned clients Monday that global food prices are at risk of going sharply higher. The Wall Street bank blamed soaring diesel and fertilizer costs caused by the Strait of Hormuz crisis, tensions in the Black Sea threatening the global grain trade, and the risk of drought and extreme heat brought on by El Niño.
Lastly, diesel is virtually indistinguishable from home heating oil, which is used to heat about 5 million homes mostly in the Northeast, including about half the homes in Maine.
“Consumers who use heating oil for their home are going to have quite a sticker shock when they get the first delivery for the season,” Lipow said.
With global oil prices closing at $107.63 a barrel, average diesel prices in the U.S. are likely to climb higher, perhaps to as much as $7 a gallon, he added.
The diesel spike has already cost Americans more than $46 billion since the war in Iran started, according to a cost tracker from Brown University’s Watson School of International and Public Affairs. That amounts to over $350 in higher costs per U.S. household.
