Diesel prices in the United States have surpassed a painful new milestone for the transportation industry: $6 per gallon, an increase that experts say will likely have a ripple effect for consumers as companies pass on their higher energy costs. The national average for a gallon of diesel rose to a record $6.05 on Friday, up more than 60% from $3.71 a year ago, according to AAA data. Diesel is widely used in trucks and railroads, affecting the cost of transporting goods in the United States, as well as in construction and agriculture. In California, which has the highest fuel prices in the country, diesel was $7.98 per gallon, according to AAA. Gasoline prices also continued their recent rapid rise, reaching a national average of $4.29 per gallon, AAA reported. Economists said companies have largely refrained from passing on higher diesel prices to consumers. But that is likely to change in the coming months if those costs remain elevated, said Thomas Ryan, senior North American economist at Capital Economics. Higher diesel prices are “something that households will have to endure at least for the rest of this year,” he told CBS News. Diesel prices are already showing up at the wholesale level, and the Labor Department said Thursday that more than a third of the increase in goods prices for producers in August was attributable to rising diesel costs, which rose 24.1% last month. Why are diesel prices increasing? The rise in diesel prices is a result of the ongoing war in Iran, which has affected global oil supplies, said Patrick De Haan, an oil expert at GasBuddy. The price of Brent crude, the international standard, jumped to $108 a barrel on Thursday as clashes between the United States and Iran intensified. Experts also note that diesel prices are rising due to a global squeeze on refining capacity in both the Middle East and Russia. Ukrainian drone attacks on Russia’s energy infrastructure have sharply reduced the country’s ability to refine oil, amplifying price pressures, de Haan said. According to the Atlantic Council, a nonpartisan think tank focused on geopolitics, Ukraine has significantly increased the volume of drone attacks on Russian refineries since the beginning of the year, leading to fuel shortages. “There is simply not enough diesel right now in Russia to export any volume, and unfortunately that is a big problem for a global economy that sees almost all pieces of heavy machinery need diesel,” De Haan told CBS News. Supply constraints caused by a slowdown in refining are one of the main reasons diesel prices have risen faster than gasoline prices, which hover around $4.28 a gallon, according to AAA. Such limitations are expected to continue indefinitely. Analysts at S&P Global Energy said in a report Thursday that they do not expect global oil production to return to pre-war levels by the end of 2027, as the research firm previously forecast. What do higher diesel prices mean for Americans? Consumers have been mostly protected from rising diesel prices this year, experts say. This is because retailers typically have contracts in place with suppliers and margins to absorb the additional cost. But when those contracts are renegotiated and companies have to start paying fuel surcharges, the cushion they have to absorb costs could be reduced, leading them to pass those costs on to consumers. “I would say that the real turning point is whether [higher diesel] “If it goes on for probably more than six weeks, you’re really going to see a bigger impact as those large end users are going to be forced to buy in large quantities at some point,” De Haan said. One area where that trickle-down effect is likely to occur: grocery stores. Foods that need to be refrigerated and travel long distances, such as seafood and fresh produce, are more vulnerable to price increases, while non-perishable items and locally sourced products tend to be more insulated from fuel costs, David Ortega, a food economist at Michigan State University, told CBS News in an email that the increase in diesel prices could also increase other costs: “If you are buying furniture, there will be a large and expensive increase. If you’re buying a new car, those destination charges could skyrocket,” De Haan said. “The trickle will be everywhere, but it will be very varied.” Edited by Alain Sherter and Brian Dakss More from CBS News Go deeper with The Free Press in:
