CHICAGO (AP) — Diesel prices in the U.S. reached a record average of $5.85 per gallon on Friday, attributed to ongoing disruptions in fuel supply due to the six-month conflict with Iran. The increase in diesel prices is expected to raise transportation costs for various goods, affecting consumers and businesses alike.
Higher diesel prices impact freight and delivery networks, leading to increased costs for everyday items. Businesses across multiple sectors are already passing on these costs to consumers, resulting in higher fees for online orders and mail packages. Grocery prices, particularly for perishable items like produce and meat, are among the first to reflect these increases.
Experts caution that prolonged high diesel prices could lead to further price hikes across a range of products transported by diesel-powered vehicles, including clothing and furniture. The average price of regular gasoline has also increased, currently at $4.15 per gallon, compared to $3.20 a year ago, according to AAA.
Before the conflict with Iran began, the national average for diesel was approximately $3.76 per gallon. Prices surged as crude oil costs rose amid supply chain disruptions, especially in the Strait of Hormuz, a critical shipping route. Brent crude oil was trading at over $95 a barrel on Friday, up from around $70 prior to the conflict.
Historically, diesel prices have been higher than gasoline prices, and they have risen more rapidly during energy crises. Fuel costs account for about 15% to 30% of total food costs, according to the Independent Grocers Alliance. As a result, higher diesel prices typically lead to increased food prices, although the effects may take time to manifest.
In July, U.S. grocery prices rose by 2.7% compared to the previous year, with seafood prices increasing by 7% and fresh fruit prices by 4.9%. Factors such as demand fluctuations can also influence food prices, as seen with lettuce prices that fell due to a cyclospora outbreak despite higher transportation costs.
As diesel prices remain elevated, consumers may experience more significant financial strain. David Ortega, a professor of food economics and policy at Michigan State University, noted that initial cost increases are often absorbed along the supply chain, but as contracts are renegotiated, more costs are likely to reach consumers.
Companies like Amazon have already implemented temporary surcharges due to rising fuel costs, and major shipping services such as UPS and FedEx have added fees to their packages. Ajesh Kapoor, CEO of trucking technology firm SemiCab, emphasized the direct impact of diesel prices on transportation across all modes.
The implications extend beyond consumer goods, affecting public transit systems and emergency power supplies that rely on diesel. Analysts warn that the situation could worsen, particularly in regions like Africa and Asia that depend heavily on imports from the Middle East and have faced significant energy challenges during the conflict.
Neil Atkinson, an energy analyst, highlighted the growing crisis due to high prices and dwindling physical stocks of refined oil products like diesel. He noted that the current situation is unsustainable and cannot continue indefinitely.