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The national average price of diesel fuel in the US hit $6.505 per gallon on September 21, according to data from the American Automobile Association. That’s a number no American trucker, farmer, or logistics executive has ever seen on a national scale, and it carries consequences that extend far beyond the fuel pump.
To put that figure in perspective: diesel crossed the $6 threshold barely ten days earlier, around September 10-11. Year-over-year, diesel prices are up roughly 60%.
Why diesel, and why now
The more immediate pressure comes from the ongoing US-Israeli conflict with Iran, which has disrupted shipping through the Strait of Hormuz. Roughly 20% of the world’s oil passes through that narrow waterway on any given day.
Meanwhile, Ukrainian military operations targeting Russian refineries have prompted Moscow to impose restrictions on diesel exports. Russia has historically been one of Europe’s largest diesel suppliers, and those barrels need to come from somewhere else now.
The result: US diesel inventories have fallen to 106.3 million barrels, roughly 13% below the five-year average. That’s not a comfortable cushion heading into the fall harvest season, when agricultural demand for diesel typically peaks.
The inflation wildcard
Brown University estimates that higher diesel prices have added more than $46 billion to US consumer fuel costs since the onset of the Iran-related conflict.
Transportation costs feed directly into the Producer Price Index, which in turn pressures the Consumer Price Index.
Who gets hit hardest
Trucking companies operate on thin margins in the best of times. Fuel typically represents 25-30% of a carrier’s operating costs, and a 60% year-over-year increase in diesel doesn’t leave much room for profitability unless those costs get passed along to shippers and, ultimately, consumers.
Fall harvest operations are diesel-intensive, from combines in the field to grain trucks moving product to elevators and rail terminals. Farmers who locked in fuel contracts earlier in the year are relatively insulated. Those who didn’t are staring at input costs that could meaningfully erode margins on crops whose prices haven’t kept pace.
Jet fuel and diesel are both middle distillates refined from the same crude oil fractions. When diesel demand surges, refiners face difficult allocation decisions that can push jet fuel prices higher as well.
What to watch from here
US refinery utilization rates will be another critical variable. Refinery maintenance season typically runs through the fall, temporarily reducing domestic output at precisely the wrong moment. If utilization drops meaningfully below current levels while inventories remain 13% under the five-year average, the math gets ugly fast.
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