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Diesel prices in the U.S. have passed a painful new milestone for the transportation industry: $6 a gallon, a surge experts say is likely to have ripple effects for consumers as businesses pass on their higher energy costs.
The national average for a gallon of diesel rose to a record $6.05 on Thursday, up more than 60% from $3.71 a year ago, according to data from AAA. Diesel is widely used in trucking and rail, affecting the cost of transporting goods around the U.S., as well as in construction and farming.
GasBuddy, which tracks changes in gas prices in real time, said diesel had already climbed past $6.
The price of gasoline continued its recent rapid rise as well, hitting a national average of $4.29 a gallon Thursday, AAA reported.
Economists said businesses have largely held off passing along higher diesel prices to consumers. But that is likely to change over the next few months if those costs remain elevated, said Thomas Ryan, a senior North American economist at Capital Economics.
Higher diesel prices are “something that households are going to have to weather at least over the remainder of this year,” he told CBS News.
Diesel prices are already showing up at the wholesale level, with the Department of Labor noting on Thursday that more than a third of the jump in goods prices for producers in August was attributable to rising diesel costs, which rose 24.1% last month.
Why are diesel prices rising?
Rising diesel prices are a result of the ongoing war in Iran, which has crimped global oil supply, said Patrick De Haan, a petroleum expert at GasBuddy.
The price of Brent crude, the international standard, jumped on Thursday to $108 a barrel as fighting between the U.S. and Iran escalated.
Experts also note that diesel prices are soaring due to a global squeeze on refining capacity in both the Middle East and Russia. Ukrainian drone strikes on Russia’s energy infrastructure have sharply reduced the country’s ability to refine oil, amplifying price pressures, De Haan said.
According to the Atlantic Council, a nonpartisan think tank focused on geopolitics, Ukraine has significantly stepped up the volume of drone strikes on Russian refineries since the start of the year, leading to a fuel shortage.
“There’s just not enough diesel right now in Russia to export any volume of it, and that’s unfortunately a big problem for a global economy that sees almost every piece of heavy machinery needing diesel,” De Haan told CBS News.
Supply constraints sparked by the slowdown in refining are a major reason why diesel prices have risen faster than gasoline, which is hovering above $4.28 a gallon, according to AAA.
Such constraints are expected to continue indefinitely. Analysts at S&P Global Energy said in a report on Thursday that they don’t expect global oil production to return to prewar levels by the end of 2027, as the research firm previously forecast.
What do higher diesel prices mean for Americans?
Consumers have been mostly shielded from surging diesel prices this year, experts note. That’s because retailers typically have existing contracts with suppliers and the margins to absorb the extra cost.
But when those contracts are renegotiated and companies have to start paying fuel surcharges, it could reduce the cushion they have to absorb costs, leading them to pass those costs on to consumers.
“I would say the real turning point is if [higher diesel] sticks around for probably more than six weeks, you’re really going to see more impact trickle down as those large end users are going to be forced to buy in large quantities at some point,” De Haan said.
One area where that trickle-down effect is likely to show up: grocery stores.
Foods that need to be refrigerated and travel long distances, such as seafood and fresh produce, are most vulnerable to price increases, while nonperishable items and locally sourced products tend to be more insulated from fuel costs, David Ortega, a food economist at Michigan State University, told CBS News in an email.
The spike in diesel prices could also drive up other costs.
“If you’re shopping for furniture, that is going to see a big, expensive increase. If you’re shopping for a new car, those destination charges could shoot up,” De Haan said. “The trickle-down is going to be everywhere, but it’s going to be so varied.”
