The national average price of diesel in the United States reached a record high of $5.85 per gallon on Friday, according to the American Automobile Association (AAA). This peak surpasses the previous record of nearly $5.82 set in June 2022 and comes amid a six-month war with Iran that has disrupted the global flow of fuel.
Impact on Essential Goods and Inflation
Because diesel powers heavy machinery, trains, buses, and large trucks, the price surge is expected to increase production and transportation costs for numerous products. John Kilduff, a partner at Again Capital, told CNBC that diesel prices feed directly into higher inflation, noting that goods delivered to homes via trucks run on diesel fuel. Bob McNally, founder of Rapidan Energy, described diesel as the important macro fuel to watch
due to its deep embedding in industrial uses, agriculture, and heating.
Some businesses have already implemented added fees on mail packages and online orders to offset these costs. Andy Lipow, president of Lipow Oil Associates, characterized diesel as a stealth tax
, explaining that higher fuel costs are passed to consumers through increased prices for services and goods delivered by rail and truck.
The food supply chain is particularly vulnerable as diesel powers fishing boats, farm equipment, and the trucks that deliver to grocery stores.
Global Supply Disruptions
The price spike is driven by a global supply crunch caused by conflicts in both Iran and Ukraine. Valero Chief Operating Officer Gary Simmons stated on a July 30 earnings call that wars have shut down refineries with approximately 5 million barrels per day of capacity. According to Andy Lipow, about 8% of the 28 million barrels of daily global diesel demand is currently disrupted. This includes:
- Russia: A diesel export ban affecting about 800,000 barrels per day following Ukrainian attacks on refineries.
- Strait of Hormuz: Disruptions affecting about 1.2 million barrels per day due to Iranian attacks on regional energy infrastructure and tankers.
- Saudi Arabia: The Jizan refinery, which produces about 200,000 barrels per day, was knocked out by Houthi allies of Iran.
Domestic Market and Political Stakes
The record prices arrive ahead of the November congressional midterm elections, with the cost of living emerging as a top electoral issue. Public opinion polls indicate the war with Iran remains unpopular with U.S. voters. President Donald Trump has met with executives from companies such as Valero, Marathon Petroleum, and Chevron to push for increased production and refining capacity.
While President Trump and Vice President JD Vance have claimed the U.S. military now controls the Strait of Hormuz—with Trump claiming 18 million barrels of oil pass through daily—Iran has accused the administration of market manipulation and insists it still controls the waterway.
Comparison of Fuel Price Trends
Gasoline prices have also risen, reaching $4.14 on Friday. AAA reported that the national average has never been above $4 per gallon on Labor Day.
Diesel prices have climbed more steeply; they are nearly 56% more expensive than the $3.76 average recorded before the U.S. and Israel launched the war against Iran. In California, diesel costs have reached $7.70 per gallon, which is nearly $2 higher than the national average.
When adjusted for inflation, however, some historical prices were higher.
