U.S. diesel prices soar to an all-time record high

Diesel hit a new record price in the U.S. on Friday, soaring to an average of $5.85 a gallon for the first time ever as the six-month war with Iran disrupts the world’s flow of fuel.

Because diesel is used for many freight and delivery networks, higher diesel prices mean higher transportation costs for a long list of everyday goods.

This could add to Republicans’ political challenges ahead of November’s midterm elections, with voters already sour on U.S. President Donald Trump’s management of the economy. AP-NORC polling this summer showed two out of three U.S. adults disapproved of how Trump is handling the economy.

2:02 Carney extends gas tax holiday to 2027

More expensive fuel is increasing bills for businesses across sectors — some of which have already passed on costs to consumers in the form of added fees on online orders and packages in the mail. And shoppers may see more and more sticker shock trickle down to store shelves.

One of the most immediate strains is being felt in the grocery aisle, particularly with produce, meat and other perishable foods that need to be hauled in and restocked frequently — or even harvested using diesel-powered farm equipment. It can take time for all of those costs to trickle down.

Still, experts warn that price hikes could mount the longer diesel remains expensive. A range of other products are also transported by diesel trucks, trains and boats, including clothing, cosmetics, furniture and more.

The price for regular gasoline has also been going up, although not as fast as the price of diesel. The average price was $4.15 a gallon, compared with $3.20 at this time last year, according to AAA, which says gas has never been above $4 a gallon on Labor Day. Prices for regular gasoline, however, are far from the record of $5.02 a gallon set in June 2022.

Before the U.S. and Israel launched their war against Iran in late February, the national average for a gallon of diesel was about $3.76 in the U.S., per AAA. Prices quickly climbed as the cost of crude oil — the main ingredient in diesel, as well as gasoline — soared amid supply chain disruptions and production cuts across the Middle East, notably with most tanker traffic bottlenecked in the key Strait of Hormuz.

Despite prices cooling some during hopes for peace earlier in the summer, oil has now renewed its climb as fighting once more escalates between the U.S. and Iran. Brent crude, the international standard, was trading at more than $95 a barrel Friday, up from roughly $70 before the war. Prices at the pump always follow closely behind.

Get daily National news

Get daily Canada news delivered to your inbox so you'll never miss the day's top stories.

Sign up for daily National newsletter Get Started

By providing your email address, you have read and agree to Global News' Terms and Conditions and Privacy Policy.

The last time U.S. businesses and drivers saw sky-high fuel prices was in June 2022, when diesel reached as high as nearly $5.82 a gallon on average, months after the Ukraine war began and world leaders imposed sanctions against Russia, a leading oil producer.

2:12 Feds extend gas tax break into 2027

When adjusted for inflation, however, prices have been higher in the past. Ahead of the 2008 financial crisis, for example, diesel peaked at about $4.74 a gallon — equivalent to $7.20 in 2026, according to the government’s latest data. And 2022’s record of nearly $5.82 would be about $6.56 this year when accounting for inflation.

That doesn’t take the pain away from today’s steep prices, which are already bringing ripple effects for the economy and wider costs of living. Drivers are feeling the pain each time they fill up gasoline, too.

The average $4.15 for a gallon of regular unleaded is up from $2.98 before the Iran war, although still well below the 2022 peak of nearly $5.02 a gallon nationwide.

Diesel has been more expensive than gasoline for decades, and its price has risen at a faster pace during recent energy crises. Some reasons include more limited supply, less flexibility in demand, and diesel’s position in global commerce overall. Individual households may find ways to drive less when gas prices are high, for example, but there’s fewer immediate substitutes for networks that rely on diesel to help produce and haul goods worldwide.

Diesel is integral to every part of the food supply chain. It powers farm equipment and fishing boats as well as the trains, cargo ships and trucks that get food to grocery stores.

Fuel accounts for roughly 15 per cent to 30 per cent of the total cost of food, according to the Independent Grocers Alliance, a grouping of 7,500 global supermarkets. Because of this, higher diesel costs often result in more expensive food, although it can take a while for energy shocks to wind their way through the supply chain.

Items that need to stay refrigerated while they’re transported are often the first to see prices rise, according to David Ortega, a professor of food economics and policy at Michigan State University. In July, for example, overall U.S. grocery prices were up 2.7 per cent compared to last July, but seafood prices were up 7 per cent and fresh fruit prices were up 4.9 per cent.

0:25 Taylor Farms recalls jalapeno products amid potential salmonella contamination

Ortega cautioned that there can be other factors at play when food prices go up or down. Lettuce also faced higher transportation costs in July, but a drop in demand due to the cyclospora outbreak caused prices to fall.

Still, consumers could feel more of a squeeze the longer diesel prices remain high.

“Early on, much of the cost increase gets absorbed along the supply chain through existing freight contracts and retailer margins,” Ortega said. “But as contracts reprice and fuel surcharges take hold, more of that cost makes its way to the grocery store.”

Back in April, e-commerce giant Amazon rolled out a temporary 3.5 per cent fuel and logistics surcharge on some third-party sellers. And United Parcel Service, FedEx and the United States Postal Service also moved to add fees on some of the packages they ship earlier in the war, citing rising operational costs for fuel overall.

Ajesh Kapoor, CEO and founder of trucking technology company SemiCab, said trucking and transportation can adapt to rising diesel prices — but at some point there is a limit.

“Diesel price has a very, very direct impact on everything that moves on pretty much any mode,” Kapoor said.

The ramifications extend beyond the movement of consumer goods. Some public transit buses and trains also run on diesel — and diesel generators are often used for backup or emergency power, if not central electricity sources in some remote parts of the world.

Experts warn that the consequences could continue to deepen — particularly in countries in Africa and Asia, which rely more heavily on imports from the Middle East and have already been hit the hardest by energy shocks over the course of the war.

Neil Atkinson, energy analyst and senior fellow at the National Center for Energy Analytics, said refined oil products like diesel are becoming more expensive as supplies get stretched.

“This is gradually becoming a major crisis because A) the prices themselves are very high — but the physical stocks of these products are dwindling,” he said in a weekly briefing with maritime data firm Lloyd’s List Intelligence, pointing to the strain on the global refining system. “This cannot go on forever.”