Diesel costs more than $6 a gallon for the first time. Here’s how that affects you

Diesel Prices Above $6 Could Raise Costs Across the US Economy

Healfromzero.com – Diesel costs more than 6 dollars a gallon nationwide for the first time, reaching an average of $6.06 on Friday. Although relatively few passenger vehicles use diesel, the fuel is vital to the transportation, farming, construction and heating systems that support daily life across the United States.

The new national average rose 21 cents in one week. It also exceeded the previous record of $5.82 per gallon, set in June 2022 after Russia’s invasion of Ukraine. Since the war with Iran began, diesel prices have climbed more than 55%, compared with a 40% increase for gasoline over the same period.

Why diesel prices are climbing faster

Higher oil prices are one reason diesel costs more than 6 dollars a gallon. Oil futures have returned above $100 per barrel during the continuing US-Iran war, raising the cost of producing fuels. Refinery constraints are adding another layer of pressure by limiting how much diesel can be made from crude oil.

Refineries in the Middle East and Russia have been damaged by conflict. Russia, a major diesel supplier, has also reduced overseas shipments while addressing shortages at home. China has limited diesel exports as it seeks to protect domestic supply. Together, those developments have restricted global supplies while demand from freight, agriculture and industry remains strong.

“Refiners have already been maximizing the production of diesel. We simply can’t get any more diesel out of the system,” said Andy Lipow, president of Lipow Oil Associates.

The annual rise is on track to be the largest percentage increase ever recorded in AAA diesel-price data. For many households, however, the impact may emerge gradually through prices paid for goods and services rather than through a visit to a diesel pump.

How higher diesel costs can affect shopping and shipping

Nearly all heavy-duty trucks and freight trains run on diesel. They carry groceries, clothing, appliances, building materials and countless other products between ports, warehouses, stores and homes. When fuel becomes more expensive, trucking companies and railroads often apply fuel surcharges to their customers.

Manufacturers, distributors and retailers may absorb some of those added expenses, but they can also pass them along through higher prices. The effect will vary by business and product, yet widespread diesel inflation can place pressure on costs throughout supply chains.

California illustrates the scale of the challenge. The state’s average diesel price stands at $7.98 per gallon as the ports of Los Angeles and Long Beach prepare for a seasonal rise in container traffic before holiday shopping. Transporting those goods to warehouses and retailers is expected to be more expensive, adding to logistics costs.

Patrick De Haan, head of petroleum analysis at GasBuddy, has warned that California diesel prices could rise well beyond $8 a gallon.

“Some pumps aren’t even built to display what could come next,” he said in a post on X.

Food and home-heating budgets may feel the pressure

Diesel costs more than 6 dollars a gallon at a particularly demanding time for agriculture. Fall harvest work depends on tractors, combines, irrigation systems and other equipment that use diesel. Higher fuel expenses can increase the financial strain on growers and may eventually contribute to higher food prices.

Goldman Sachs told clients Monday that global food prices could face a sharp increase. It cited elevated diesel and fertilizer costs connected to the Strait of Hormuz crisis, Black Sea tensions that threaten grain trade, and the potential for drought and extreme heat associated with El Nino.

Diesel is also closely related to home heating oil. About 5 million US homes use heating oil, with especially heavy reliance in the Northeast. In Maine, roughly half of households use it. People who buy heating oil may face higher bills when deliveries begin for winter, since the price generally reflects market conditions at the time of delivery.

FAQ: What US Households Can Expect From Higher Diesel Prices

Will higher diesel prices raise gasoline prices too?

Gasoline and diesel prices can both rise when crude oil becomes more expensive, but they are separate fuel markets. Diesel has increased faster than gasoline since the war with Iran began because of tighter diesel supply and refinery limitations.

Why should drivers care if their vehicle does not use diesel?

Most Americans do not drive diesel passenger vehicles, but diesel powers the trucks, trains, farm machinery and industrial equipment involved in supplying many everyday goods. Higher freight and operating costs can affect the prices consumers see at stores.

What can households that use heating oil do?

Households that depend on heating oil can monitor local delivery prices and plan for winter fuel expenses early. Because heating-oil costs can change with the market, the price paid may be higher than it was earlier in the year.