A monthlong run of rising crude oil prices and refineries’ nearing capacity has pushed the average cost of diesel fuel to its highest since 2022.
At $5.78 per gallon Thursday, the cost of diesel is up more than 53% since the war with Iran started in late February. At the time, it was $3.76 nationwide.
The price of unleaded gasoline, which most personal vehicles run on, rose alongside diesel Thursday. According to AAA data tracked by NBC News, the national average was $4.14 per gallon, up 2 cents from Wednesday.
Around the world, crude oil prices also keep climbing. The international oil benchmark Brent surpassed $97 per barrel Thursday morning but ended the day nearly unchanged at $95.52. The price of Brent is up 20% since Aug. 4.
But experts are focused this week on diesel, the fuel that powers everything from boats and trains to farm equipment and 18-wheelers. Around the world, planting and harvesting depend on diesel-powered machines. As a result, higher diesel prices now could mean higher grocery prices in the fall.
Several factors are fueling the global rise in energy prices. Chief among them is the war in Iran, which analysts view as a stalemate that has choked major maritime arteries for oil and gas.
Recent attacks on ships in the critical Strait of Hormuz, coupled with retaliatory U.S. strikes on Iranian targets, mean daily vessel traffic in the waterway remains minimal. Before the war, the strait was a key passageway through which about 20% of the world’s oil supply passed every day.
Also putting pressure on gas prices this week is the recent escalation of the Ukraine war.
“Following Ukrainian drone attacks on refineries, Russia has banned diesel exports until the end of September amid domestic supply concerns,” ING commodities analysts wrote. “This matters because Russia is the world’s second-largest diesel exporter. Combined disruptions are equivalent to around 20% of global seaborne diesel trade.”
Only two developments can realistically be expected to bring meaningful relief to oil and gas prices, they wrote. One is a higher flow of oil and gas through the Persian Gulf, and the other is a resumption of Russian diesel exports.
On Wednesday, President Donald Trump said the latest round of U.S. strikes on Iran would not last “too long,” but he added, “We’re prepared to do another one any time we want.”
He also said U.S. forces were “bringing lots of boats out” of the Strait of Hormuz every day.
Trump’s upbeat comments did little to ease oil price pressures, however.
Last week, Goldman Sachs Research estimated that Persian Gulf oil exports have recovered to two-thirds of prewar levels. On Thursday, ING estimated it was 50%.
But those figures, likewise, brought little comfort to energy markets. Wholesale gas prices were up 1% in early Thursday trading, as was natural gas.
One of the many knock-on effects of the energy price shock has been a broad expectation among investors that inflation will stay elevated. That in turn has driven up U.S. Treasury yields, which are sensitive to inflation projections.
After having climbed all week, bond yields finally dipped slightly Thursday as markets weighed the odds of an interest rate hike this month. That small drop is unlikely to bring major relief to consumers, however.
The average 30-year fixed mortgage rate dropped from 6.91% on Wednesday to 6.88% on Thursday.
Still, despite the rising energy prices and the protracted wars, Federal Reserve Governor Christoper Waller said Thursday that he expects consumer and wholesale inflation readings in the weeks ahead to be “reasonable,” which in Fed-speak means not too high.
From Waller’s viewpoint, “So far energy [prices have] not bled into other goods and prices.”
That having been said, if inflation data for August “comes in hot, I would consider a rate hike,” he said at an event hosted by the Reuters news agency.
“I’m going to paraphrase John Lennon here,” he said. “Give disinflation a chance.”
