US retail diesel hits record as Hormuz, Russia crises stretch on

US retail diesel rose to a record, threatening to further spike energy-driven inflation as wars in Iran and Russia roil the market.

The widely used fuel climbed to a nationwide average of $5.85 a gallon at the pump on Thursday, according to the American Automobile Association. The advance pushed the price above the former peak set in June 2022, as a crunch on global supplies continues to unfold just ahead of peak-demand season.

In the Middle East, the US-Iran war has disrupted flows through the Strait of Hormuz , with TotalEnergies SE’s head Patrick Pouyanne saying in August there wasn’t a “single tanker of products” moving out of the waterway. At the same time, Russia extended a ban on diesel exports through September after a wave of Ukrainian drone strikes on the country’s refineries.

Diesel’s climb to unprecedented levels carries significant consequences. The fuel — known as the workhorse of the global economy — powers everything from electricity generation and home heating to tractors and construction equipment. Its rise presents a burden for consumers, as well as a political challenge for the White House ahead of the midterm elections just two months away.

In addition, the fuel’s steady advance could further hamper the Federal Reserve’s efforts to tamp down inflation. Policymakers at the US central bank — who have sent mixed messages in recent weeks on whether there’s a need to hike interest rates — are next due to gather in mid-September.

It’s unclear when the surge will end. In the US, stockpiles of distillate fuels like diesel are at the lowest level on record for this time of year. On the East Coast, the main demand region for home-heating oil — which is effectively interchangeable with diesel — stockpiles have never been lower at any time. Imports are below-average for late summer, while exports remain high.

President Donald Trump has urged refiners to boost output and bring down prices of both diesel and gasoline, but US fuel-makers have little room to make more. Refineries are already running near, or in some cases, above stated maximum capacity, after producing fuels at a prolific pace over summer.

Unlike in 2022 — when diesel spiked after Russia’s invasion of Ukraine in February — the current upswing sees prices setting fresh records just as demand begins to peak. In the Northern Hemisphere, heating season and harvest-time are due begin, while planting is set to kick off in the Southern Hemisphere.

On Thursday, Vice President JD Vance declined to predict when gasoline would return to around $3 a gallon; it’s currently above $4 nationally. He pinned the reason for the elevated prices on Iran’s attacks in the Strait of Hormuz, saying: “The fundamental reality is that the reason gas prices are so high right now is because the Iranians are shooting at commercial shipping.”