While the ongoing fuel and oil crises have led to Americans spending more at the gas pump, diesel fuel has reached record highs, putting potential greater strain on American’s pocketbooks, and taking a larger bite out of operating businesses cost.
As of September 14, diesel climbed to a record $6.23 per gallon, with the current national average hitting $6.30 per gallon this week, according to AAA Fuel Prices. According to AAA data, the national average diesel price reached about $6.05 on September 11, surpassing the previous record set in June of 2022, when inflation was at a 40 year high.
The latest price is a 68% jump over the $3.71 cost one year ago, highlighting the spike of the recent fuel crisis.
However, the rise in cost is driven by a global shortage of refined petroleum products rather than just the challenges facing the crude oil industry. The reduced traffic in the Strait of Hormuz, disruptions to the Middle East energy infrastructure and attacks on Russian refineries have reduced the availability of diesel and other middle distillates, adding to broader inflationary concerns.
And market observers do not know if diesel has hit a ceiling or whether another round of increases is possible, given the tight inventories and refinery capacity disruption around the globe.
Just as the national average crossed the $6 mark last month, U.S. inventories were 13% below the five-year average, while the diesel crack spread, a key measure of refinery profitability, reached a record level.
The ongoing war with Iran continues to disrupt oil and refined product exports, while Russia’s refining capacity has reduced greatly in the wake of refinery attacks, leading to Moscow putting a ban on diesel exports.
Another layer adding to the price increase is the disruption on Saudi Arabia’s infrastructure, namely the attacks affecting the East-West pipeline, which has the capacity to move roughly 4 million barrels of oil per day toward the Red Sea. Brent crude then climbed to $107 per barrel, while West Texas Intermediate hit $103, important for diesel because refiners are operating in an environment where both crude stock and refined-product supply are under pressure.
Forecasters predict the price outlook could remain elevated in 2027. On September 9 of this year, the Energy Information Administration raised its forecast for the average U.S. retail diesel price to $5.07 per gallon for the year, up 4.4% from their previous forecast.
However, it raised its 2027 forecast to $4.40 per gallon, an increase of 8.2% from the previous forecast of $4.07.
While that average appears inconsistent with the current higher price, the EIA forecast assumes that oil flows through the Middle East will gradually improve, and that global inventories will recover.
However, the EIA expects U.S. inventories to fall below 100 million barrels and remain below the five-year low through much of 2027. It also expects global distillate production to remain below last year’s levels in the coming months, that means the current sticker shock may not disappear quickly.
On Monday, President Donald Trump issued an executive order that makes a specific kind of tax- exempt diesel fuel reserved for farm and construction equipment available to a broad spectrum of road vehicles to reduce diesel costs.
This so-called ‘dyed diesel’ is exempt from a 24.4-cent per gallon federal tax, making it a lower-priced option than regular diesel. Dyed diesel is nearly identical to regular diesel besides a small amount of dye used by inspectors to ensure only permitted vehicle owners avail themselves of the fuel.
The executive order aims to curb fuel costs tied to vital supply chains, from groceries to clothing to electronics.
The White House also called on federal agencies to defer payments of federal road taxes for the remainder of 2026.
“Farmers and truckers are essential to the American way of life. Restricted global diesel supply has led to rising prices, and these key industries have been hit particularly hard,” said the White House in the executive order.
“While my administration has undertaken historic effort to ensure fuel affordability for our citizens, it’s clear that further temporary relief is necessary,” continued the statement.
Meaningful reduction in diesel prices could lower expenses for farmers and trucking and transport businesses, as well as easing the costs to consumers, already challenged by stubborn inflation.
There are limitations to the effectiveness of the executive order. Dyed diesel is sold at limited locations, designed primarily for industry operators, constraining access to the fuel.
Expanding the vehicles eligible for dyed diesel could prompt a demand surge, exceed available supply and put further upward pressure at the pumps.
The move could lower diesel costs by 25-cents per gallon, but some say the savings make up a small share of the price increases that have hammered diesel prices since the onset of the war.
For example, a truck with a 150-gallon tank would run its owner $945 for a fill up at the current diesel cost. The roughly 25-cent per gallon savings would result in about $37.50 savings per fill up.
Some analysts note the savings for diesel users will not result in much relief for consumers.
“If you look at how the price of fuel factors into overall food costs, we’re talking about a single digit (percentage) share of overall food costs,” said David Ortega, food economist at Michigan State University. “This is not something that will really be driving prices down meaningfully.”
The price savings for eligible diesel buyers could prove more significant in states that offered up exemption from state-level taxes, compounding the benefit of the federal tax exemption.
A handful of states have offered their own waiver for dyed diesel, including Texas, Nebraska and North Carolina, while Ohio and Georgia recently suspended their diesel taxes.
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