The average price of a gallon of diesel in the U.S. was $5.62 on August 26, 53% higher than a year earlier, according to the AAA motor club.
The New York Times reports that diesel prices are now hovering close to a record high and could drive up prices of many other goods and services, after fuel supplies were disrupted by the U.S.-Israel war on Iran.
Diesel powers not only trucks and trains that keep freight moving across the country, but also farm machinery and other equipment essential to the U.S. economy. As the price of fuel climbs, businesses have little option but to pass on that higher cost to their customers.
The last time U.S. diesel prices rose this high was in 2022 after Russia invaded Ukraine, hitting a peak of $5.82 a gallon.
The price spike is caused by multiple factors. Certainly, the effective near-closure of the Strait of Hormuz has pinched the supply of refined and crude oil coming out of the Persian Gulf. But, in addition, because of Iranian attacks on refineries in the region, there’s not as much oil being refined in that area. An August 1 report from S&P Global reckons the volume of crude oil refined in the Middle East has dropped to about eight million barrels a day in 2026, down 1.6 million barrels a day from 2025 levels.
Russian oil, too, is now in such short supply because Ukraine has hit many of its refining facilities, it has suspended diesel exports. And, while western nations have put a sanction on Russian oil, the drop to around 3.9 million barrels per day from 5.3 million barrels a year ago means there’s less oil on the market generally, driving up the price.
The U.S. has bumped up production, operating at around 97% of their capacity, according to the Energy Information Administration. The Times reports that exports of diesel and related fuels are up by around 28% compared with last year, and U.S. inventories of those fuels have fallen sharply. As a result, U.S. refineries are typically doubling their profits, earning close to $90 for every barrel of diesel. But the rest of the U.S. economy, along with industries across the world, are suffering from the higher price of a vital fuel.
