The average price of diesel in the U.S. exceeded $6 per gallon for the first time, exacerbating inflation worries amidst continuing fuel supply disruptions.
AAA reported the national average on Friday was $6.06 per gallon, beating the record of $5.82 which occurred during Russia’s invasion of Ukraine in 2022. Fuel prices also went up, to $4.29 per gallon of gasoline.
Since the US and Israel began their war with Iran in late February, the price of diesel has risen by close to 60%. Energy flows through the Middle East have been impaired and attacks on fuel infrastructure and shipping have multiplied the pressures on global supplies.
The war’s Ukrainian drone strikes targeting Russian refineries are also having an impact on supplies. Russia has also extended restrictions on diesel, marine fuel and gas-oil exports until September 30 and China has also limited fuel exports.
The rise is especially notable for those sectors heavily reliant on diesel such as trucking, agriculture, construction, mining and manufacturing. Increased fuel costs can escalate into transportation and production costs and ultimately lead to higher prices at the pump.
Timing is particularly critical for the US agriculture industry now as harvest starts. October tends to be the height of harvest; November harvests remain relatively high as well, and colder weather will likely boost demand for heating fuels.
According to the US Energy Information Administration, US diesel stocks were about 13% lower than the five-year average at 106.3 million barrels last week. Refiners have been running at high levels due to healthy refining margins and supplies are tight.
Oil prices have also spiked up significantly. Brent was $107.63 a barrel while U.S. West Texas Intermediate was $102.48 a barrel, the highest prices since mid-May.
The rally in fuel prices coincides with the US’s release of its August consumer inflation data. Consumer prices climbed 3.4% y-o-y in July, with energy prices remaining at the forefront as energy prices continue to increase, potentially adding to inflation pressures.
The deteriorating fuel market has been reported to be related to the disruptions in the Strait of Hormuz and the Red Sea. There is concern that world-wide supplies could continue to be under pressure because of restrictions on the movement of tankers through the Hormuz and to the increasing dangers of shipping.
