US Diesel Tops $6.50 as Worsening Global Crunch Feeds Inflation
US retail diesel prices topped $6.50 a gallon for the first time, extending a war-driven rally that’s rippling through the largest economy.
Average nationwide prices rose to $6.505 a gallon, according to figures from the American Automobile Association. The pace of increases has accelerated in September — gaining more than 87 cents so far this month — with prices rising almost every day and surging beyond the peak set in 2022.
Global supplies of the workhorse fuel have been squeezed by the US-Iran war, with shipments through the vital Strait of Hormuz still curtailed. Meanwhile, cargoes of crude oil from the region haven’t fully recovered to pre-war levels, limiting production of fuels from refineries elsewhere in the world.
In addition, Russia has banned most exports of the fuel, and may extend that curb through October, with Ukrainian drone strikes continuing to pound the country’s processors. At the weekend, the Moscow Oil Refinery was hit in an attack that was part of the largest overnight barrage this year.
Read More: Iran War Drives Bigger Diesel Supply Loss Despite Trump’s Claims
Most US drivers don’t pump diesel into their cars. But the fuel — which goes into trucks, agricultural equipment, power generators, boats, trains, and home-heating systems — touches nearly every part of the economy.
With midterm elections looming, record diesel prices could erode support for President Donald Trump’s Republican Party in agricultural states like Iowa, as well as states that depend on home-heating oil such as Maine.
Still, there may be some solace for drivers and consumers, even if it might not feel like it. On an inflation-adjusted basis, prices remain below their 2022 highs, according to the Institute for Progress, a Washington-based think tank.
At the policy level, the surge at the pump has spurred speculation the Trump administration may impose export curbs to keep fuel at home. Still, Interior Secretary Doug Burgum, who leads the president’s National Energy Dominance Council, has said a US ban on shipments wouldn’t bring down prices.
Stubborn US inflationary readings prompted the Federal Reserve to raise rates by a quarter-percentage point last week, its first hike since 2023. At the weekend, Fed Bank of Minneapolis President Neel Kashkari said inflation remained too high, with pressures broadening beyond the oil-price shock.
Goldman Sachs Group Inc. warned in a recent note that diesel prices could still extend gains given the global constraints, while also making the case that gasoline may now offer even bigger potential for investors’ bets.