National diesel prices surged to a record $6.40 per gallon on Thursday, while gasoline prices rose to $4.44 per gallon, according to AAA. Energy experts warn that fuel costs are likely to climb further in the coming days amid ongoing geopolitical conflicts.
Diesel prices have increased 77 cents since early September, with California already exceeding $8.35 per gallon. Gasoline prices have risen nearly 50% since the start of the U.S. conflict with Iran in February, according to GasBuddy data. Petroleum analyst Patrick De Haan projects gasoline could reach $4.50 per gallon later this week and diesel can hit $6.60 per gallon as early as this weekend.
The surge in diesel prices is driven by disruptions to global oil supply, including attacks on Saudi Arabia’s East-West pipeline and a Ukrainian drone campaign targeting Russian oil infrastructure. These incidents have forced major refineries to scale back production, increasing transit costs for fuel distribution. Retailers are absorbing some of the added expenses, but analysts warn that higher diesel prices will eventually ripple through the economy.
Immediate Economic Impact
The transportation sector is the first to feel the strain, with trucking and rail companies facing higher operational costs. David Russell, global head of market strategy at TradeStation Group, described diesel as the economy’s most universal tangible input, meaning its price affects nearly all goods and services. Norfolk Southern’s chief commercial officer noted that in California, diesel prices have already reached $8 per gallon, setting a precedent for other regions.
Economists and supply chain experts warn that sustained high diesel prices will push up costs for consumer goods, utilities, and agricultural products. Jeff Lenard, vice president of media and strategic communications at the National Association of Convenience Stores, said higher transit costs are adding several cents to the price of selling fuel at gas stations. Retailers are currently absorbing most of these increases, but analysts anticipate that consumers will eventually bear the burden through higher prices.
Broader Consequences for Consumers and Industries
The rise in diesel prices is expected to affect multiple sectors, including food distribution, construction, and heating costs. Tom Kloza, chief energy adviser for Gulf Oil, noted that diesel is essential for transporting food and other goods, making it difficult to reduce consumption. He added that elevated diesel prices could also increase Americans’ utility bills, particularly in the Northeast, where around 4 million households rely on heating oil derived from diesel.
Researchers at Brown University estimate that the extra cost of diesel since the start of the Iran war amounts to roughly $374 per U.S. household. This figure reflects the widespread economic impact of higher fuel prices, even for consumers who do not directly use diesel. The Biden administration has explored potential solutions, including invoking the Defense Production Act to scale up refining capacity or restricting diesel exports to lower domestic prices. However, no policy changes have been confirmed yet.
Geopolitical Factors Driving the Crisis
The conflict between the U.S. and Iran, which began in February, has significantly disrupted global oil supply chains. Additional incidents, such as the attack on Saudi Arabia’s East-West pipeline, have further constrained oil availability. Ukrainian drone strikes on Russian oil infrastructure have also forced refineries to reduce production, exacerbating the supply crunch.
President Donald Trump has publicly urged Ukraine to halt its attacks on Russian refineries, arguing that such actions worsen fuel price inflation. Meanwhile, the administration has relaxed certain labor rules for fuel-truck drivers to expedite the movement of gasoline and diesel. Analysts suggest these measures may provide temporary relief, but long-term solutions remain uncertain without addressing the root causes of the supply disruptions.