US Diesel Prices Hit a Record High Over the Weekend

Diesel prices have surged across the US since the Iran war began in late February, with the national average reaching a record $5.85 per gallon in early September, roughly 58% higher than a year ago.

The spike has pushed diesel above its previous 2022 record, just as farmers enter harvest season and demand for trucking, heating and other diesel-intensive activities begins to rise.

Why are diesel prices increasing globally?

The biggest culprit is the global shortage of refined diesel, rather than simply a shortage of crude oil. The war has disrupted oil and fuel flows through the Strait of Hormuz, while Ukrainian attacks on Russian refineries have taken additional diesel off the market. Industry executives estimate that roughly 4 million barrels per day of diesel supply is missing from Russia and the Middle East.

At the same time, refineries are running close to full capacity, inventories have been drawn down and winter demand is approaching, leaving little spare capacity to replace lost supplies. The result is a huge premium for diesel relative to crude, with European and American diesel crack spreads recently reaching more than $100 per barrel.

• A crack spread is the difference between the price of crude oil and the price refiners can sell the resulting fuels for. It’s effectively a measure of refining profit margins.

The inflation factor: How is diesel one of the largest contributors to inflation?

Diesel is particularly inflationary because it is the fuel of the goods economy, powering much of the trucking, rail, agriculture, construction and mining sectors. Higher diesel costs therefore raise the cost of moving everything from food and building materials to manufactured goods, with those costs eventually passed along to consumers.

Statistics Canada found that diesel prices rose 35–76% across regions and that long-distance trucking prices subsequently rose 4.5% in a single month.

Looking ahead: Industry executives expect global diesel markets to remain tight through the winter, as refineries operate near capacity and seasonal demand increases.

A sustained decline would likely require some combination of more normal shipping through the Strait of Hormuz, a return of Russian refinery capacity and exports, and rebuilding depleted inventories. The International Energy Agency expects high prices to suppress demand, while additional production from the Americas is helping offset some Middle Eastern losses.