US diesel prices are nearing their April war peak, a level not seen since mid-2022. The latest AAA data shows the nationwide average retail price for diesel reached $5.69 per gallon. This surge in price is attributed to a combination of geopolitical factors, including the deepening US-Iran conflict which has disrupted the Strait of Hormuz, and Ukrainian attacks on Russian refineries limiting exports from a major global fuel supplier. These simultaneous shocks are straining the global refining complex, which already suffers from limited spare capacity.
The rising cost of diesel is a significant concern for Western economies, as it is a critical industrial fuel impacting freight, agriculture, construction, and heavy industry. Soaring diesel prices quickly ripple through supply chains, leading to increased transportation and construction costs, a resurgence in food inflation, weakened consumer sentiment, and intensified margin pressure for small and medium-sized businesses. The Bloomberg NYMEX one-month heating-oil/crude spread (HOCL1 Index) also surged, breaching $100 per barrel before hitting $108 overnight and trading at $104 early Wednesday morning.
In response to these rising prices, particularly with diesel creeping toward $6 per gallon nationally and gasoline above the politically sensitive $4 mark ahead of November's midterm elections, President Trump reportedly summoned top US refining executives for a closed-door meeting to urge them to increase diesel and gasoline production. Despite the global crunch, China, one of the few countries with significant spare refining capacity, appears to have little economic or strategic incentive to provide relief to Western fuel markets, according to Kelly Chen, a senior economist at DNB Carnegie.
