U.S. diesel prices jumped above $5 a gallon on Tuesday, marking the highest level since December 2022, as the strain on global energy markets from the war with Iran continues to ripple through the American economy.
Diesel prices reached $5.04 a gallon, up from $4.78 a week ago and from $3.65 over a month ago, according to data from AAA.
Diesel prices are rising as the war in the Middle East constrains the world's oil supply and drives up prices of Brent crude, the international benchmark, above $100 a barrel. Iranian attacks on oil and gas facilities across the Persian Gulf have hobbled operations in oil-producing nations such as the United Arab Emirates, where a drone attack on Monday sparked a fire in the Fujairah Oil Industries Zone.
The war has also disrupted shipping through the Strait of Hormuz, a waterway through which 20% of the global oil supply flows.
That has prompted President Trump to consider a military operation to escort ships. Mr. Trump has also called on other nations to help reopen the strait to get traffic moving.
"Until we see a meaningful resumption of oil flows through the Strait of Hormuz, upward pressure on fuel prices is likely to persist," Patrick De Haan, a petroleum expert at GasBuddy, said in a note yesterday.
The last time diesel topped $5 a gallon was in December 2022. At that point, prices were receding after hitting a record high of $5.81 in June 2022, when fuel prices spiked due to Russia's invasion of Ukraine.
Inflation risks
Experts say that U.S. customers could start to feel the pinch of rising diesel prices because trucks, trains and barges that move much of what Americans buy run on the fuel.
Diane Swonk, the chief economist at KPMG, told CBS News anchor and MoneyWatch correspondent Kelly O'Grady last week that higher transportation costs could eventually trickle through to other parts of the economy in the form of price inflation.
"These are the multipliers to get to a much more broad-based increase in prices that go beyond what we see at the gas pump and showing up in things like the grocery store as well," she said.
Rising diesel prices also carry potential implications for the construction and farming industries, given that most of their equipment runs on it.
De Haan said in a note last week that diesel price spikes are "particularly disruptive" for trucking companies, farmers, freight carriers and construction firms because their budgets may not be able to adjust fast enough to handle the fuel surcharges added by transportation companies to cover higher fuel prices.
Diesel is rising faster than gasoline
Diesel has climbed more quickly than gasoline, which has surged more than 70 cents per gallon since the war began. Since March 1, the price of diesel has climbed 34%, versus a 27% rise for gasoline, according to AAA data.
That's partly because diesel was already in short supply before the war began, De Haan said in a note last week. Months of cold weather increased heating oil consumption, which is linked to diesel, De Haan explained to CBS News.
"They're both ultra-low sulfur, so they're kind of used interchangeably," he said. "And when heating oil consumption goes up, it means basically distillate or diesel consumption goes up."
Edited by Aimee Picchi
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How rising diesel prices may affect inflation
How rising diesel price may affect inflation amid Iran war
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