The average price of diesel in the United States surpassed $5 a gallon on Thursday, a 33% increase since the start of the war with Iran, as the renewed conflict continues to inflate energy prices.
The national average price Thursday was $5.01, according to the AAA automobile club, up 7 cents Since the day before.
Soaring diesel prices may ripple through the rest of the economy due to its many uses, including industrial machinery, commercial transportation and power generation.
U.S. diesel prices topped $5 a gallon for the first time in March, the highest level since 2022, when Russia invaded Ukraine. Prices fell below $5 in June after Iran and the United States announced they had signed a memorandum of understanding intended to quell fighting in the Strait of Hormuz, a critical artery for global oil.
But new strikes between the United States and Iran in the strait have brought shipping to a near halt. On Monday, President Trump announced he would reinstate a naval blockade on Iranian ports and considered forcing Gulf states to invest in the United States in exchange for military protection as they transit the strait.
And if the oil market is tight, that of diesel and gasoline is even tighter. Many refineries around the world that turn crude oil into fuel have closed or are producing at lower levels.
A number of oil and gas installations in the Persian Gulf were damaged in attacks early in the war, which began on February 28. Refineries around the world are processing about 4% less oil than a year ago, according to the International Energy Agency.
This decline was particularly marked in Russia, whose refineries suffered significant damage following Ukrainian drone attacks. Russia is typically one of the world’s largest exporters of diesel, but it banned foreign sales of the fuel in early July to preserve domestic supplies. The ban is in effect until July 31. Even though the United States does not import fuel from Russia, the loss of exports has further reduced global supply.
China has also reduced its refining operations, amid weakened domestic demand and high crude oil prices. It has also cut fuel exports over the past four months to shore up its own supplies.
As a result, the gap between current prices and pre-war prices is much higher for gasoline and diesel than for oil. The national average price of gasoline was $3.94 Thursday, according to AAA, up 32 percent since the start of the war. The price of Brent crude, the international benchmark, was close to $85 per barrel on Thursday.
The IEA said in a report this month that although more crude oil was coming to market, “refinery activity and product supply were much slower to respond.”
“In June, exports of refined products and LPG from the Gulf remained less than half their pre-war levels, compared with crude flows which reached almost three-quarters of their February rates,” the report said, referring to liquefied petroleum gas.
