U.S. Diesel Hits Record $6 as Global Wars Squeeze Fuel Supply

The nationwide average diesel price reached $6.0556 per gallon on Friday, according to AAA, roughly 63% higher than a year earlier. California is experiencing even greater pressure, with diesel averaging nearly $7.98 per gallon. The increase is raising operating costs for truckers and farmers who depend heavily on the fuel.

The surge has followed a sharp rise in crude oil prices as fighting between the U.S. and Iran intensified in September. U.S. crude futures moved above $100 per barrel on Thursday for the first time since May and have gained about 20% this month. Gasoline prices are also elevated, reaching a record $4.15 per gallon around Labor Day.

Diesel carries an outsized economic impact because it sits deep within supply chains. Trucks, trains and ships rely on the fuel to move goods, while agricultural machinery uses it for planting and harvesting. Higher diesel costs can therefore be passed through to consumers via more expensive food, consumer products and energy.

Supply disruptions are coming from multiple fronts. Ukrainian attacks on Russian refineries have contributed to Moscow banning diesel exports, while Iran and Houthi forces have targeted refineries belonging to U.S. Gulf allies. Iranian attacks on tankers have also constrained fuel shipments through the Strait of Hormuz, further tightening global availability.

The impact on refining capacity has been substantial. Valero Chief Operating Officer Gary Simmons said in July that the conflicts had taken refineries representing roughly 5 million barrels per day of capacity offline. Andy Lipow of Lipow Oil Associates estimates that the world has lost nearly 8% of its diesel supply, with little spare refining capacity available to compensate.

The situation leaves the U.S. with limited ability to quickly increase domestic fuel production. RBC Capital Markets’ Helima Croft said U.S. refineries are already operating at around 98% utilization, leaving virtually no spare capacity. That makes the market particularly vulnerable if geopolitical disruptions remove additional refining or transportation capacity.

For the broader economy, the risk extends well beyond higher prices at gas stations. Americans are already spending an estimated $700 million more per day on gasoline and diesel than a year ago, according to GasBuddy’s Patrick De Haan. If diesel remains near record levels, the additional transportation and production costs could increasingly flow through the economy, creating another source of pressure for businesses and household budgets.