Diesel hits record $5.85/gallon as Hormuz tensions choke supply
US retail diesel prices surge past 2022 highs after Ukraine drone strikes cripple Russian refining
The national average retail price for diesel in the U.S. reached an unprecedented high of $5.85 per gallon on Friday, surpassing the previous record set in June 2022, according to data from the American Automobile Association (AAA). The new peak reflects a sharp increase in fuel costs driven by geopolitical tensions and supply disruptions.
The AAA reported that the daily average price climbed from $5.7832 per gallon on Thursday to $5.85 on Friday, breaking the prior record of $5.82 per gallon set shortly after Russia’s invasion of Ukraine. Just before military actions against Iran began in early March, the average price stood at $3.758 per gallon, meaning diesel has surged by approximately $2.10 per gallon since then.
Factors Behind the Price Surge: Diesel
The recent spike in diesel prices stems from two major disruptions. First, tensions in the Middle East—particularly around the Strait of Hormuz, a critical route for global oil shipments—have raised concerns about supply constraints. While the waterway has not been fully closed, reduced tanker traffic has tightened the market for middle distillates, which include diesel and heating oil.
Marine Gasoil
Second, Ukrainian drone strikes on Russian refineries have targeted facilities that produce a significant portion of the world’s diesel. These attacks have curtailed Russian fuel exports, further straining global supplies. The impact is evident in futures markets: the ultra-low sulfur diesel (ULSD) contract on the Chicago Mercantile Exchange (CME) settled at $4.6822 per gallon on Wednesday, nearing its all-time high.
Despite the recent rally, diesel futures have shown volatility. After peaking earlier in the week, the ULSD contract fell by 8.86 cents per gallon on Thursday and was trading at $4.4739 per gallon by mid-morning Friday. Analysts attribute the pullback to short-term profit-taking and speculation that tensions in the Strait of Hormuz might ease. However, experts warn that infrastructure challenges could limit a sustained recovery in supply.
Broader Economic Impact
The record diesel prices have far-reaching consequences. The shipping industry, which relies heavily on diesel and marine gasoil, faces higher operational costs, potentially leading to increased freight rates. Consumers may also feel the effects, particularly in the northeastern U.S., where heating oil—a close chemical relative of diesel—is widely used for home heating.
Kevin Book, managing director of ClearView Energy Partners, emphasized the severity of the situation in a recent interview. “Middle distillates are at the top of the list as far as the energy policy discussion right now,” he said, noting that U.S. refineries are operating at full capacity but still struggle to offset global supply shortages. “These pressures are compounded by outages in Russia.”
Looking ahead, the market will face a critical test in October, when refineries typically ramp up production for the winter heating season. If disruptions in Russia or the Strait of Hormuz persist, diesel prices could climb even higher, further straining businesses and households already grappling with elevated fuel costs.
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