U.S. diesel prices hit record high as war-driven supply shocks raise transport costs

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US diesel prices hit record high

Highlights

U.S. national average diesel price hits a record $6.0556 per gallon Friday, up 63% year-over-year, with California reaching $7.9827 per gallon.
U.S. crude futures surpass $100 per barrel for the first time since May, gaining 20% in September amid U.S.-Iran conflict and global supply disruptions.
Refinery shutdowns from ongoing wars have cut around 5 million barrels per day of capacity, removing nearly 8% of global diesel supply and straining markets.

Supply disruptions drive diesel above $6

As reported by CNBC, the national average price for diesel reaches $6.0556 per gallon on Friday, the first time it tops $6, based on AAA data. Truckers and farmers are paying about 63% more to fuel semis and tractors than at the same time last year, while prices in California, the largest U.S. agriculture state, climb to $7.9827 per gallon.

Crude prices are also moving higher as fighting between the U.S. and Iran escalates this month. U.S. crude futures top $100 per barrel on Thursday for the first time since May, and the contract gains about 20% in September.

The conflicts in Eastern Europe and the Middle East are disrupting global fuel flows. Kyiv is pounding Russian refineries, prompting Moscow to ban diesel exports, while Iran and its Houthi allies in Yemen are also hitting refineries linked to U.S. Gulf allies. Exports through the Strait of Hormuz are constrained by Iranian attacks on tankers.

Broader economic strain builds

Diesel is central to freight, agriculture and parts of the power and heating system, making higher prices more damaging to the wider economy than gasoline in many cases. Bob McNally, president of Rapidan Energy, says diesel costs are passed through to consumers in food, goods and energy prices, calling it a more costly and impactful fuel.

Patrick De Haan, head of petroleum analysis at GasBuddy, says diesel at these levels becomes a "silent killer" for the economy. He also says gasoline prices are unusually high for this point in the year, with pump prices reaching a Labor Day record of $4.15 per gallon earlier this week, while Americans are spending about $700 million more per day on gas and diesel than a year ago.

Industry analysts say refining constraints leave little room to offset the shortage. Valero Chief Operating Officer Gary Simmons says on the refiner's July 30 earnings call that refinery shutdowns linked to the wars remove about 5 million barrels per day of capacity, while Andy Lipow of Lipow Oil Associates says the world has lost nearly 8% of its diesel supply. Helima Croft, head of global commodity strategy at RBC Capital Markets, says the price surge poses an enormous challenge for the Trump administration because U.S. refineries are running at 98% utilization rates with no spare capacity.

Our earlier report on the U.S. pressure campaign against Iran covered Washington’s mix of military action and escalating sanctions, including steps targeting banks and other channels tied to Iran. We noted that the administration was preparing additional measures on a near-term timeline, a stance that has kept energy markets on edge over the risk of prolonged disruption in the region.

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