US average retail diesel prices are experiencing a significant surge, with the Department of Energy/Energy Information Administration reporting a rise of 3.5 cents/gallon to $5.348/gallon. This marks the fourth consecutive week of increases, totaling 77 cents/gallon during that period. This upward trend comes despite plummeting diesel futures markets.
Several factors contribute to these rising prices. The war in the Middle East, particularly Iran's near-complete blockade of the Strait of Hormuz, has significantly impacted global energy flows. This vital artery accounts for 10% to 20% of total global seaborne diesel, leading to a $1.89, or 50%, increase in the national average retail price since the conflict began. Crude oil prices, which underpin diesel, have also surged, driving up transportation costs and consumer prices.
U.S. fleets are feeling the impact, with average spending hitting $5.52 per gallon on diesel, according to Samsara data. This surpasses the prior all-time high of $5.50 set in June 2022. The U.S. national average price of diesel crossed $5 a gallon for only the second time ever on Monday, according to GasBuddy data, with the only other instance being December 2022 after Russia's invasion of Ukraine.
The increase in benchmark diesel prices has been substantial, with one week seeing a jump of 33.8 cents/gallon to $5.134/gallon, the second largest since military action against Iran began. This sharp rise has occurred after retail prices typically react to increases in the price of ultra-low sulfur diesel (ULSD) on the CME commodity exchange. Economists warn that these surging diesel prices could slow global economic activity, as higher costs are passed on to consumers, and could become a political issue for President Donald Trump ahead of midterm elections.
