US diesel prices hit record high of $5.85 per gallon

US diesel prices hit record high of $5.85 per gallon

U.S. Diesel prices reached an all-time high on Friday, averaging $5.85 a gallon. The surge eclipses the previous record of $5.81 set in June 2022, according to AAA.

The price spike comes amid a six-month war with Iran that has disrupted global fuel flows. Brent crude, the international benchmark, has plateaued around $95 a barrel—roughly 45% higher than its price one year ago before the conflict began. According to AAA, gasoline prices followed a similar upward trajectory, with the national average for regular gasoline reaching nearly $4.15 a gallon on Friday.

Supply Chain Bottlenecks

The primary driver of the cost increase is the impingement of shipping lanes in the Strait of Hormuz. Ship traffic through the strait remains well below pre-war levels, where it previously averaged 130 or more transits per day. Shipping data company Lloyd's List Intelligence reported 102 transits last week, down from 126 the week prior.

The decline is attributed to the risk of Iranian attacks on ships that do not comply with an Iranian vetting regime. While some oil continues to flow via a southern route near the coast of Oman under U.S. Guidance, the overall global fuel squeeze has deepened. Market tightening is further exacerbated by a Russian ban on diesel exports following Ukrainian drone attacks on refineries.

Energy analyst Neil Atkinson told Lloyd's List Intelligence that refined oil products are becoming more expensive as physical stocks dwindle and the global refining system is strained. This cannot go on forever, Atkinson said.

Economic Ripple Effects

Because diesel powers freight, delivery networks, and farm equipment, the record prices are expected to increase the cost of everyday goods. According to the Independent Grocers Alliance, fuel represents roughly 15% to 30% of the total cost of food.

David Ortega, a professor of food economics and policy at Michigan State University, noted that costs are often initially absorbed by retailer margins and freight contracts, but eventually make their way to the grocery store as surcharges take hold. Perishable items requiring refrigeration are typically the first to see price increases. In July, seafood prices rose 7% and fresh fruit rose 4.9% compared to the previous July, though Ortega noted other factors, such as a cyclospora outbreak, can affect specific items like lettuce.

Other sectors have already responded to rising operational costs. E-commerce company Amazon implemented a temporary 3.5% fuel and logistics surcharge on certain third-party sellers in April. FedEx, United Parcel Service, and the United States Postal Service also added fees to some packages earlier in the war.

Ajesh Kapoor, CEO of SemiCab, stated that diesel prices have a very, very direct impact on everything that moves on pretty much any mode.

Geopolitical Context

The economic strain coincides with ongoing military hostilities. President Trump, who launched the war jointly with Israel on Feb. 28, has characterized the U.S. Objective as preventing Iran from obtaining a nuclear weapon. Israeli Prime Minister Benjamin Netanyahu stated Thursday that the Iranian regime is teetering and weaker than ever following U.S. Airstrikes.

Vice President JD Vance told reporters at the White House that he would not commit to a timeline for lower pump prices, though he claimed prices could have been much, much higher without U.S. Efforts in the conflict. Vance ruled out new negotiations with Iran until attacks on ships in the Strait of Hormuz cease.

Meanwhile, the U.S. Military is investigating allegations from Iranian officials that an American strike killed four civilians at a wedding party. Vance expressed skepticism regarding these claims, citing the reliability of Iranian state media.

Looking Ahead

Analysts expect diesel demand to grow in the coming weeks due to the harvest season and holiday retail shipping. This trend comes as the U.S. Approaches midterm elections in November, with experts suggesting economic issues and fuel costs may be top of mind for voters.

The current price climate is a notable shift from the period before the war began in February, when the national average for diesel was approximately $3.76 and regular gasoline was $2.98, per AAA data.