Diesel prices hit a record $6.53 a gallon on Tuesday, Sept. 22, according to AAA data, pushed up by the war with Iran and Russia's diesel export ban. Diesel moves trucks, tractors and trains, so the higher cost spreads through freight, farms and food aid on its way to household budgets.
Washington is divided over relief. President Donald Trump has backed a U.S. diesel export ban. Analysts warn it would backfire, and as of Friday the White House had made no final decision.
Why are diesel prices at record highs?
Tuesday's record was 77% above the price a year earlier, CBS News reported.
Two shocks drove the rise. The war with Iran has disrupted the Strait of Hormuz, a route that carried one-fifth of global oil supply before the conflict. Then in July, Russia banned diesel exports while Ukraine attacked its production facilities. Patrick De Haan of GasBuddy told CBS that Russia normally produces about one in nine of the world's diesel barrels.
The U.S. makes more diesel than it uses: about 5.3 million barrels a day of distillate against roughly 3.6 million of domestic demand, De Haan said. But diesel trades on a global market, so American prices follow shortages elsewhere. De Haan also said GasBuddy data show no diesel shortages in the U.S.
How do diesel prices reach household budgets?
Distillate fuel runs trucks, farm equipment, trains, boats and planes, and it is also used to heat homes, Bob McNally, president of Rapidan Energy Group, told PBS News. "It's a sudden, sharp, unavoidable tax increase you have no choice but to pay," McNally said.
The cost travels through several channels:
- Freight: Carriers add fuel surcharges, but Tim Pollock of the California Trucking Association told PBS they fall short. "It doesn't make up all the fuel, especially when it's astronomically high like it is," he said. Carriers are asking customers for emergency help.
- Farms: Illinois farmer Steve Turner said farms commonly burn 10,000 to 20,000 gallons of diesel, and budgets set in January never planned for this. John Boyd of the National Black Farmers Association said he pays roughly 50% more at the pump while crops fetch about $5 a bushel. "I'm robbing Peter to pay Paul because I don't have the money," Boyd said.
- Food aid: New York food-rescue group City Harvest said fuel for its 23-truck fleet costs about 15% more than last year. "And we estimate that that could add about $100,000 to our budget that we weren't expecting to pay," CEO Jilly Stephens said.
- Small business: The Boyz Rentals, a Colorado construction equipment firm, said diesel has more than doubled its operating costs and that it is raising prices.
What diesel relief has been proposed?
- An export ban. On Sept. 17, Rep. Tim Burchett (R-Tenn.) introduced one bill banning diesel exports through January 2027 and another that would trigger a ban whenever the national average reaches $5 a gallon. Iowa Republicans Sen. Chuck Grassley and Rep. Ashley Hinson support a ban. "I've called for it within my people. I've been talking about it," Trump said, as reported by the New York Times and cited by CBS. Politico reported on Sept. 23 that the White House was preparing a plan for a 90-day ban.
- Voluntary export cuts. Energy Secretary Chris Wright has asked the oil industry to curb exports, Politico reported, as the administration floated alternatives after protest from the industry.
- Shipping and fuel-rule waivers. De Haan favors extending the current waiver of the Jones Act, which requires cargo moving between U.S. ports to travel on U.S.-built, U.S.-flagged, U.S.-crewed ships. That waiver expires Nov. 15. He also backs temporarily waiving the federal renewable fuel requirement, which he estimates could save 10 to 20 cents a gallon.
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Who would win and lose under a diesel export ban?
McNally told PBS a ban would lower prices on the Gulf Coast and in the Lower Midwest for a few weeks. After that, he said, refiners would cut output and world prices would jump. The Northeast and Alaska, where prices depend on imported fuel prices, would pay more, and eventually so would everyone. "They only work for a very short period of time. Then you're worse off afterwards," he said.
De Haan said a ban "is very likely to backfire" and that refiners would find ways around it.
The push for a ban, led largely by farm-state Republicans, has strained the party's ties with the oil industry, Politico reported. Meanwhile farmers like Boyd say they are absorbing the cost now. "But we're the guys, the first in line that are paying for this administration's mistakes," he said.
De Haan pointed to one fix above the rest: "Aside from that, the only thing that the administration really can do is get the Strait reopened."
As of Friday, the White House was eyeing steps that fall short of an export ban and had made no final decision, according to Politico.