US Diesel Prices Hit Record $5.85 a Gallon as Iran War Disrupts Fuel Supplies

Diesel prices in the United States hit a new record Friday, rising to an average of $5.85 per gallon for the first time ever as the six-month war with Iran disrupts global fuel supplies.

Diesel is widely used across freight, delivery and transportation networks. As a result, higher diesel prices are increasing transportation costs for a wide range of everyday goods. Businesses across several sectors are facing higher fuel expenses, with some already passing those costs on to consumers through additional fees for online orders and package deliveries. Consumers could see further price increases on store shelves if fuel costs remain elevated.

The surge in fuel prices could also have political consequences, as economic concerns are expected to remain a major issue for voters ahead of the November midterm elections.

Rising pressure on food prices

One of the most immediate effects is being felt in grocery stores. Higher diesel costs are particularly affecting the transportation of produce, meat and other perishable foods that need to be regularly delivered and restocked. Farmers also rely heavily on diesel-powered equipment, adding to production costs.

Experts warn that price increases could become more widespread if diesel remains expensive for an extended period. Many other products—including clothing, cosmetics and furniture—are transported by diesel-powered trucks, trains and ships.

Gasoline prices have also increased, although more slowly than diesel. According to AAA, the average price for regular gasoline stood at $4.15 per gallon, compared with $3.20 at the same time last year.

Strait of Hormuz disruption drives fuel costs higher

Before the United States and Israel launched their war against Iran in late February, the national average price of diesel in the U.S. was around $3.76 per gallon, according to AAA.

Prices climbed rapidly as crude oil—the main ingredient in both diesel and gasoline—became more expensive amid supply-chain disruptions and production cuts across the Middle East.

A major factor has been the disruption of tanker traffic through the strategically important Strait of Hormuz, a critical route for global oil shipments. With much of the tanker traffic bottlenecked there, concerns over global fuel supplies have intensified.

Oil prices eased somewhat earlier in the summer as hopes for peace emerged, but renewed fighting between the U.S. and Iran has pushed crude prices higher again. Brent crude, the international benchmark, was trading above $95 a barrel Friday, compared with roughly $70 before the war.

The previous U.S. diesel price record came in June 2022, when prices reached nearly $5.82 per gallon several months after Russia's invasion of Ukraine and the subsequent sanctions imposed on Russia, a major global oil producer.

Source: The Associated Press (AP)