Diesel prices in the United States climbed to a record national average of $5.85 per gallon on Friday, surpassing the previous record set in June 2022 and adding new pressure on businesses and consumers already dealing with higher costs.
According to the Associated Press, the surge is being driven largely by the ongoing U.S.-Iran conflict and major disruptions to global fuel supplies, particularly through the Strait of Hormuz, one of the world’s most important energy shipping routes.
The previous nominal record for diesel was about $5.82 per gallon in June 2022, following Russia’s invasion of Ukraine. The new $5.85 average is now the highest recorded U.S. price in dollar terms, although diesel was more expensive on an inflation-adjusted basis before the 2008 financial crisis.
The rise in diesel matters far beyond truck drivers.
Diesel powers much of the infrastructure that moves goods through the economy, including freight trucks, delivery vehicles, tractors, trains, boats, construction equipment and refrigerated transportation. That means higher diesel prices can quickly raise the cost of moving food, packages, building materials and other everyday goods.
Produce, seafood and other products that require refrigerated transport can be especially sensitive to higher fuel costs. Businesses may absorb some of those expenses, but many eventually pass at least part of the increase on to customers through higher prices or fuel surcharges.
Major delivery companies, including Amazon, UPS and FedEx, have already faced higher fuel expenses, with some transportation and delivery costs being passed along through surcharges.
The pressure is also being felt in agriculture, manufacturing, construction and e-commerce, sectors that rely heavily on diesel-powered transportation and machinery. Analysts warn that the increase could feed broader inflation if high fuel prices remain in place for an extended period.
Why are diesel prices rising?
The price of crude oil has climbed sharply as fighting between the United States and Iran has intensified again.
Brent crude, the international oil benchmark, was trading above $95 per barrel Friday, compared with roughly $70 before the conflict. U.S. crude prices have also risen sharply.
Shipping through the Strait of Hormuz remains heavily disrupted. The waterway is crucial to the global energy market, and reduced tanker traffic has tightened supplies of crude oil and refined fuels.
The problem is especially serious for diesel because global inventories of refined products are already low.
Reuters reports that diesel inventories on the U.S. East Coast have fallen to a record-low 19.3 million barrels, leaving the region particularly vulnerable if global supply disruptions continue.
There are also problems outside the Middle East. Ukrainian attacks on Russian refineries have reduced another important source of global diesel supply, while export restrictions and refinery disruptions elsewhere have added further pressure.
Gasoline is rising too
Regular gasoline has also become more expensive, averaging about $4.15 per gallon nationally, according to AP. Unlike diesel, however, gasoline has not yet surpassed its 2022 record.
Diesel has risen by more than 60% since the beginning of the year, according to a CNN analysis of AAA data, putting it on track for its largest annual increase since at least 2000.
The broader economic impact could become increasingly visible in grocery stores, shipping charges and household budgets if fuel prices remain elevated.
For New Jersey and the rest of the Northeast, the situation is especially worth watching because the East Coast has unusually low diesel inventories. Higher trucking and delivery costs could eventually show up in the prices consumers pay for food and other goods.
With the midterm elections approaching, record fuel prices are also becoming a political issue as voters continue to express concerns about inflation and the economy.
Sources: Associated Press; Reuters; CNN
By NJ RADAR Team