The average price of diesel fuel hit $5.04 a gallon nationwide Tuesday, the latest fallout from soaring crude oil prices brought on by Iran’s blockade of the Strait of Hormuz, a critical oil transit route.
Diesel fuel is the refined product of crude oil and biomass materials, and it is used around the world to power vehicles like freight and delivery trucks, mass transit, ships, and farm and construction equipment. According to AAA, the last time diesel prices crossed the $5 mark was in December 2022.
Although the average American likely isn’t driving a vehicle that runs on diesel, the heavier gasoline is crucial to fueling the global supply chain.
“Diesel is what moves the real economy. It hauls the food, the packages, the building supplies and the inventory sitting on store shelves,” said Paul Dietrich, chief investment strategist at Wedbush Securities.
“If the Iran war keeps diesel prices elevated, this becomes a direct hit on consumer prices. Groceries get more expensive, delivery costs rise and household budgets are tightened,” he said.
The latest diesel prices are especially jarring because of how quickly they have risen. Just a month ago, the average cost of a gallon of diesel was about $3.65, according to daily AAA fuel pricing data.
Farmers were some of the first Americans to feel the shock from skyrocketing diesel costs.
John Boyd Jr. is a fourth-generation farmer in Virginia who grows soybeans, corn and wheat. Like thousands of other family farms across the country, Boyd’s business is under increased financial pressure this year because of price hikes triggered by events halfway around the world.
Boyd told NBC News that his tractor requires 100 gallons of diesel fuel to fill it up. At the current national average, that means Boyd would be paying around $500 for a tank of gas, which “doesn’t last long.”
“That’s a lot of money for me,” Boyd said.
Aside from rising fuel costs, the price of fertilizer is also being driven higher by the Iran war. About a third of the world’s fertilizer ingredients, particularly supplies of urea, sulfur and ammonia, transit through the Strait of Hormuz on their way to global markets.
Most Americans, however, aren’t buying fertilizer or diesel at anywhere near the levels that Boyd and other farmers are.
Instead, they are absorbing the direct cost of the Iran war in the form of higher prices for unleaded gas. On Tuesday, the average price per gallon nationwide reached $3.79, according to AAA, up from just $2.92 a month ago.
The hit to family budgets from soaring gas prices comes at a time when American consumers have already been battling fatigue from years of inflation that has driven up the cost of groceries and other everyday essentials.
“Higher fuel costs act like a tax,” Dietrich said. “Households do not get more value for that extra money. They just have less left over for restaurants, travel, entertainment and discretionary purchases.”
Now, experts say the rising energy prices from the U.S.-Israeli war with Iran are likely to place an even heavier economic burden on Americans.
“Consumers may focus on regular gasoline prices, but diesel affects many other bills: deliveries, airline cargo, package shipping, commuting services and goods that require a lot of transportation,” Dietrich said.
Already, UPS and FedEx have both raised prices by adding surcharge fees for shipments to and from some countries in the Middle East. Commercial airlines are also raising fare prices and fuel surcharges as the cost of jet fuel soars.
Initially, the impact of rising diesel prices on groceries will likely be minimal and concentrated in “the types of foods that are tractor- and/or truck-intensive, perishable, refrigerated, and/or grown far away from demand centers,” said Michael Adjemian, a professor in the University of Georgia’s department of agricultural and applied economics.
Eventually, however, everyone will feel the pain.
“Diesel inflation is usually not dramatic at first. It is gradual, but hard to lower. Consumers may not notice it in one day, but over a few weeks it shows up everywhere in grocery receipts, delivery surcharges, travel costs and weaker spending power,” Dietrich said.
At this point, it’s difficult to gauge what impact rising diesel prices will have on container shipping fees.
While the conflict with Iran continues, both freight tankers and crude oil carrier vessels are facing a web of disruptions around the world that have upended the industry’s traditional pricing model.
It’s also unclear how quickly non-oil maritime freight traffic will get back to normal, if and when the fighting subsides and transit routes are once again relatively secure.
The Trump administration insists that the jump in oil prices and all the costs that stem from them will subside very quickly as soon as the United States and Israel halt their attacks on Iran.
“I can tell you that when this is over, oil prices are going to go down very, very rapidly. So is inflation. So is everything else,” President Donald Trump said Monday at the White House. “But frankly, much more important than short-term or even long-term oil prices,” he said, was that Iran be denied the capability to make a nuclear weapon.
For Boyd, the Virginia farmer, this is cold comfort.
“I keep watching the news and the president says, ‘Oh, these things are temporary,’” he told NBC News. “They’re not temporary for me.”
