The nationwide average price of diesel hit $6 per gallon Friday for the first time, an ominous record for the fuel that powers much of the U.S. economy.
The price was $6.05 as of Friday morning, according to data from motor club AAA. The national average price of regular gas was $4.29, up 15 cents since last week.
Since the war with Iran began in late February, the nationwide average diesel price has soared by 60%.
“The cost of diesel gets into just about everything,” KPMG chief economist Diane Swonk said in a recent interview.
“From running a farm ... [to the] cost of food, but also everything across the economy that’s shipped,” she said. When diesel prices rise, everything “gets that extra fee tacked onto it.”
Swonk predicted that the high cost of diesel will be an “inflationary problem” for months to come.
Since late July, diesel prices have been rising higher and faster overall than the cost of regular unleaded gas.
That’s because key refineries that produce it have been knocked offline or destroyed, both in Eastern Europe — where the Ukraine-Russia war still rages — and in the Middle East.
And while all forms of fossil fuels this year have been affected by the blockade of the Strait of the Hormuz, diesel differs somewhat from crude and unleaded gas because of the central role Russian refineries play in the global supply.
Russia typically exports more diesel than any other country, save for the U.S. But damage to its refineries from Ukrainian drones forced the Kremlin to impose a sweeping diesel export ban in July that will remain at least through the end of September.
“Consumers should be prepared to pay higher inflation for anything that requires being shipped,” Joseph Brusuelas, chief economist at the RSM management consulting firm, told NBC News.
‘Economic carnage’
Groceries are likely to be especially sensitive to higher diesel prices, Brusuelas said, in part because many supermarkets are already operating on razor-thin margins owing to the high cost of beef.
Beyond the supermarket, however, grocery prices will also reflect the rising cost of diesel across the entire food supply chain, starting with farmers.
The impact of $6-per-gallon diesel will make it even harder for some U.S. farmers, already under pressure this year from a fertilizer shortage, to stay afloat.
“It’ll push me right to the edge,” said Mark Mueller, a fourth-generation Iowa farmer. “If I don’t get pushed over the edge by diesel fuel prices, higher fertilizer prices will push me over the edge because a lot of petroleum goes into fertilizer prices, as well.”
As long as the war in Iran keeps sending prices higher for necessities like diesel and fertilizer, he said, “we are endangering one of the strongest economic pillars that we have in this country through economic uncertainty, higher prices.”
“We’re shooting ourselves in the foot, and we don’t have to,” said Mueller, who chairs the Iowa Corn Growers Association.
No relief in sight
Mueller is hardly alone in his frustration with how the war in Iran is affecting prices back home.
As Republicans gathered in Dallas this week for what President Donald Trump dubbed a midterm election convention, a new NBC News poll found that around 70% of voters disapproved of his handling of the Iran war.
“I just see economic carnage the longer this war goes on,” Mueller said.
For more than six months, Trump has insisted that the Iran war will be short. But this week he conceded that high gas prices are not likely to come down anytime soon.
“I think it’s going to take a little bit longer than the midterms” for the cost of gas to fall again, he told reporters en route to Dallas. “Right after the election, oil prices are going to be tumbling downward.”
Over the past month, the price of U.S. crude oil has risen by more than 25%.
By contrast, diesel has been on an upward trajectory since 2022, when Russia invaded Ukraine. In June of that year, the average price of diesel in the U.S. set a record at $5.82 per gallon.
And while diesel prices fell some in the ensuing years, they have never returned to pre-2022 levels.
The next time diesel prices soared was this spring, when the U.S. and Israel’s war with Iran closed the Strait of Hormuz and disrupted energy supplies around the world.
The latest jump in diesel prices is attributable, once again, to the Russia-Ukraine war, more than four years after it kicked off diesel’s initial march higher.
