U.S. diesel futures top $6 a gallon for first time since April 2022
Key Facts
U.S. diesel futures topped $6 a gallon for the first time since April 2022, according to a report published by 6abc Philadelphia on October 26, which attributed the rise to the war with Iran. The figure refers to futures contracts and does not represent the average price consumers pay at the pump. In separate data, the weekly retail average for diesel was $6.276 a gallon in the week of October 19, up $0.097 from the previous week, according to the U.S. Energy Information Administration. That put retail prices at a high level as futures also rose. The agency is scheduled to issue its next update on October 27.
Higher fuel prices feed into the cost of travel and shipping, adding pressure to the prices of goods that reach consumers by transport. The Associated Press said the U.S. war with Iran, which had lasted more than seven months when its report was published in October, had made driving and flying more expensive and added to the cost of some goods. The agency noted that companies had absorbed part of the increase in production and transport costs, but could raise prices if fuel continued to climb. The impact of higher diesel prices therefore does not necessarily pass through to retail prices immediately, as companies may initially bear some of the increase. This underscores the role of fuel in supply-chain costs, alongside its direct effect on drivers.
Diesel costs are particularly evident in the trucking industry: the Associated Press quoted the Owner-Operator Independent Drivers Association as estimating that every $1-a-gallon increase adds about $400 a week to an independent driver's fuel costs. The estimate reflects the weekly burden truck operators may face as fuel prices rise. In an effort to curb costs, an executive order delayed collection through year-end of the $0.24-a-gallon federal tax on regular diesel used in road projects. But the agency said trucking companies may benefit only modestly because tax rules vary among states. That puts tax relief up against rising fuel costs without eliminating their impact on the freight industry.
The price moves came amid broader tensions around energy supplies and shipping lanes. In a separate report published by 6abc on October 20, global oil prices reached a five-month high, alongside a report of an incident involving a tanker off Oman and reports that two tankers had been struck by sea mines south of the Strait of Hormuz. The October 26 report said the war with Iran was behind the rise in diesel futures, but the ship incidents occurred days before its publication and do not establish the cause of price moves that day. The 6abc report also noted that global oil inventories were eroding rapidly, without quantifying the decline. Supply conditions therefore remain part of the backdrop to prices, while comparing futures with the retail average remains essential to understanding the figures.
On the supply front, the Group of Seven agreed on the Friday before the Associated Press report published on October 7 to release 100 million barrels of oil and petroleum products, while a transportation official pointed to an ongoing global diesel shortage. This indicates that decisions to release stockpiles came alongside concerns about limited fuel supplies. In a parallel diplomatic track, Iran's ambassador to Islamabad said Tehran was ready to reopen the Strait of Hormuz if Washington lifted its naval blockade, accusing the United States of prolonging the confrontation. Iran's condition links reopening the waterway to developments around the blockade, without specifying a timeline. The U.S. Energy Information Administration set October 27 for its expected update to the average diesel price.