Surging prices for U.S. diesel fuel are stressing the budgets of consumers, governments and industries from trucking, railroads and air travel to agriculture and medical supplies, energy market experts say.U.S. diesel prices have risen almost 38% in the 20 days since the United State and Israel launched strikes on Iran. The average was $5.04 a gallon on Wednesday, the most expensive since December 2022, according to data from AAA.Diesel fuel powers everything from deliveries of food to grocery stores and medical supplies to hospitals along with the locomotives that drive rail transport and the heavy machinery used at construction sites. In the United States, diesel fuels more than 99% of the railcars now on the tracks.Research by the Federal Reserve Bank of Kansas City indicates that increases in diesel prices have larger impacts on overall inflation than similar gasoline price increases. Unlike gasoline prices, which primarily affect personal travel, when diesel surges higher it triggers “cost-push” inflation in which businesses must raise prices for nearly all goods to maintain their profit margins.University of Houston Energy Fellow Ed Hirs said diesel is a “fuel that drives American supply chain.” Surging diesel prices will be passed along to businesses and consumers across a wide range of goods and services, he said.”The shutdown of the Strait of Hormuz – oil and refined products can’t get through it – and of the large LNG export facility in Qatar, has forced buyers to find a substitute for LNG such as diesel,” Hirs said.”Nations across the world are buying diesel and liquified petroleum gases to replace the LNG they have been using for power generation.”LNG is the acronym for liquified natural gas.Rising diesel prices affect consumers directly through higher costs for commuting and travel while the secondary effects include increased expenditures for moving goods to the people that use them, said Hirs.About 83% of American agricultural products depend on diesel fuel, for both growing crops and then moving them to markets, according to the U.S. Department of Agriculture. Farmers use diesel to power tractors, combines and irrigation pumps, and when their costs spike it can quickly lead to a 5%-10% jump in prices for staples like milk, meat and bread.”Diesel – the fuel that powers the American economy – you’re talking about farmers, truckers, this is going to be tremendous in terms of pass-down in the days ahead,” said GasBuddy head of petroleum analysis Patrick De Haan in an interview on Friday.The rising cost of diesel for local government services like trash pickup, school buses, and grocery deliveries to senior citizens and school cafeterias is an additional financial burden on American consumers, De Haan said.The United Parcel Service and FedEx both announced significant fuel surcharge increases this week to keep pace with the spike in diesel and jet fuel prices triggered by the ongoing conflict in the Middle East.Effective Monday, UPS raised its domestic ground surcharge to 25.5% and its air surcharge to 26%, while FedEx implemented similar weekly adjustments and introduced new “demand surcharges” of up to $0.50 per pound for international shipments.Price Futures Group commodities analyst Phill Flynn said Monday in an interview on Fox News that if the Strait of Hormuz remains blocked “the resulting price shock isn’t just a number on a screen – it’s a direct hit to the American supply chain that will eventually force a reckoning for every business and household budget.”GasBuddy data on Wednesday shows diesel prices at the most expensive 10% of stations in the United States at an average of $5.68 per gallon while at the bottom 10% the average cost to consumers is $4.23 per gallon.The states with the lowest average diesel prices on Wednesday were South Dakota at $4.23 per gallon, Montana at $4.29 per gallon, and Oklahoma at $4.30 per gallon. The states with the highest average diesel prices were California at $6.39 and Washington and Hawaii at $5.93 and $5.79 per gallon, respectively.
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