U.S. diesel prices reached a record high of $5.85 a gallon on Friday, surpassing the previous peak set in May 2022 following Russia’s invasion of Ukraine. The surge is attributed to ongoing conflicts in Iran and Ukraine, disrupting global fuel supplies. The average cost is up from $5.29 last month and $3.70 a year ago, according to AAA.
Multiple factors are contributing to the price increase. Russia halted its diesel exports earlier this summer, with potential extensions of the ban through the end of the year, and its refineries have been damaged by Ukrainian drone strikes. Damage to refineries in the Middle East and disruptions to fuel shipments through the Strait of Hormuz due to the conflict in Iran are also impacting supply. These conflicts are collectively crimping the global supply chain.
U.S. refineries are currently operating at 97% of their capacity in an effort to alleviate supply chain disruptions. Diesel is a critical fuel for numerous sectors, including transportation, agriculture, and heavy machinery, accounting for 3% to 5% of costs for U.S. farmers producing wheat, corn, and other major crops.
While the Biden administration recently pledged to lower gas prices through an oil deal with Venezuela – involving the development of 17 oil fields with over $100 billion in investment and a 55% U.S. control stake in a joint venture – some analysts express skepticism about the deal’s ability to overcome long-standing obstacles to investment in Venezuela’s oil industry. Senator Mark Kelly (D-AZ) stated on X that rising diesel prices impact supply chains, farms, and food production, ultimately increasing costs for consumers.
Left-leaning outlets emphasize the impact of the wars in Iran and Ukraine, while right-leaning coverage highlights the potential for a deal with Venezuela to alleviate the crisis. Not in dispute is the record-high price and its potential impact on the U.S. economy.
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