Diesel prices are rising at a much faster clip than gasoline as the war in Iran disrupts critical oil supplies – and while most drivers don’t use the pricier fuel to fill up their tanks every day, it could bring the most pain to American wallets.
National average diesel prices hit $4.78 a gallon on Tuesday, according to AAA – a whopping 27% jump since the joint US-Israeli air strikes on Iran on Feb. 28. Gasoline prices were $3.54 on Tuesday.
The dramatic cost increases could be catastrophic for American farmers and truckers – but since diesel is integral to the transportation sector, it also means consumers could see prices rise on nearly everything in their home.
“Everything that winds up in a grocery store or everything that winds up at your retail store of choice, all of that stuff, it gets transported there and diesel is such an important part of those transportation networks,” Jeff Krimmel, founder of Krimmel Strategy Group, told The Post.
“These increased diesel costs spread across the whole economy and end up suppressing economic growth in ways that people might not immediately connect back to the cost of freight and transportation.”
Truckers typically pass along part of those higher fuel costs to retailers and restaurants, who then transfer some of the added costs to consumers in the form of price hikes – so Americans could see prices rise on everything from clothing and food to electronics, appliances and home improvement goods.
That could hammer the housing market, since more buyers will exit the market as the costs for furniture and home appliances stack up, according to Krimmel.
Tehran has cut off access to the Strait of Hormuz, a vital maritime route for 20% of the world’s oil supply – sending West Texas Intermediate crude oil and Brent above $100 earlier in the week. The benchmarks have since dipped to $83.34 and $84.79, respectively.
An unusually frigid winter across the northeastern US spiked demand for heating oil, which is virtually identical to diesel, so the fuel was already in shorter supply than gasoline ahead of the attacks in Iran.
“When gasoline prices jump, that demand is more elastic, so people will stop driving as much, they’ll start carpooling,” Krimmel told The Post.
With diesel, on the other hand, “so much of the economy depends on what’s happening in freight transportation and there’s contractual agreements in place where goods are going to move from one place to another and the diesel costs are what the diesel costs are,” he continued.
Economists are fearful that higher energy costs could ripple across consumer prices, reheating inflation and slowing growth in a toxic mix known as stagflation – making it more difficult for the Federal Reserve to slash interest rates.
Large trucking companies like UPS have already started hiking their weekly fuel surcharges, while smaller firms will struggle to raise prices without losing customers.
Higher fuel costs will also raise the prices of everything shipped internationally or cross-country on container ships and cargo carriers.
Farmers – who have already seen the price of machinery and fertilizer surge due to tariffs – could feel added pain since diesel is often used to power tractors and combines.
The hit is coming just ahead of the crucial spring planting season as prices for corn, wheat and soybeans are already on the rise.
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