High diesel prices flash a new warning sign for Americans

Rising diesel prices threaten to cause widespread economic destruction.

As investors fret about gasoline prices, the cost of an under-the-radar fuel is rising again, threatening to cause even more economic damage.

U.S. retail diesel prices averaged more than $5 a gallon on Friday, a return to levels last seen about a month ago and up more than $1.30 from last July. Rising fuel prices can make people feel less optimistic about U.S. prospects and more worried about their own finances, and diesel touches every corner of the economy.

Diesel, which yields more energy than gasoline, is the fuel of choice for heavy-duty vehicles such as commercial trucks, school buses and farm machinery. Los Angeles Unified School District, the second largest U.S. school system, said that rising diesel prices are putting "real pressure" on its budget.

Diesel also powers the countless generators and compressors that keep fruits, vegetables and other agricultural products fresh as they make their way from fields to grocery stores and restaurants through what's known as the cold chain.

The U.S. war with Iran has choked oil shipments out of the Middle East, and the recent increased hostilities have renewed worries about global energy supplies and stockpiles. To make matters worse for diesel prices, Russia has banned diesel exports at least through the end of July, making the fuel scarcer worldwide - and turning the U.S. into the world's diesel supplier of last resort.

Russia, a major diesel supplier to Turkey and Brazil as well as other countries in Latin America and Africa, halted exports to secure its own domestic supply after recent Ukrainian attacks on its refineries.

Russia exported about 800,000 barrels a day of diesel last year, and that had already dropped to about 234,000 barrels a day earlier this month due to the attacks, said Robin Mills, CEO of Qamar Energy, a consultancy in Dubai.

Without Russian diesel, importing countries have turned in large part to U.S. diesel, which has helped push U.S. domestic prices higher, Mills said.

"Whether this is a long-term problem depends on how successful the Ukrainian campaign continues to be. So far Ukraine's revised tactics have been very effective this year, and Russian repairs are not keeping up," Mills said.

Diesel hit a record national average of $5.82 a gallon in the U.S. in June 2022, as Russia's invasion of Ukraine jolted energy markets.

The war in the Middle East - the most recent, and most severe, energy jolt - is showing no signs of abating. The U.S. military said Friday it had shelled Iranian targets for the seventh straight day, and last week President Donald Trump declared the two countries' interim peace deal "over." Wall Street sees the war as ongoing, viewing the interim peace agreement as a short-lived interlude.

An impact on inflation

The closure of the Strait of Hormuz during the war with Iran has made it challenging to ship crude from the Middle East, pushing diesel prices up. Middle Eastern crude is mostly what traders call medium sour grade, and before the war most of it found its way to refineries in Asia. The Asian refineries have been replacing that medium sour crude with U.S. light sweet crude, which yields more gasoline and less diesel.

"It's a combination of the two factors - one that runs have been much lower over the last few months, simply because there's not as much crude supply to run through the refineries, and we've also had China dial back, and it's also the crude quality issue as well," said Matt Smith, an oil analyst at Kpler.

When concerns about jet-fuel supplies hit markets in the spring, U.S. and European refineries tweaked their yields to produce more of the fuel, which helped put those worries to rest. That was "to the detriment of diesel and gasoline," Smith said.

Amid shortages elsewhere, the U.S. has been exporting fuels including gasoline, diesel and propane at record levels. As long as the economics support exporting diesel versus supplying the domestic market, those gallons will continue to head out of the U.S., Smith said. That means fuel prices will remain elevated at home.

"If Europe is willing to pay up for that barrel of diesel, then it is going to be exported. In theory, prices have to rise to the point where either U.S. demand drops, or international demand for these barrels drops," he said.

The vast majority of U.S. goods, including groceries, are shipped around the country on 18-wheeler trucks, which are powered by diesel. "If the price of diesel is increasing, that's going to get reflected through into goods. It's going to have an impact on inflation," Smith said. "Whereas gasoline has a direct impact on inflation, diesel has an indirect impact because it essentially ends up being a pass-through [cost]."

Inflation cooled in June, mostly thanks to falling gasoline prices during the lull in the U.S.-Iran war. That reprieve was short-lived, however, and the U.S. average retail gasoline price has been creeping back toward $4 a gallon.

Don't miss: How U.S.-Iran tensions are threatening to end the price break at the pump

Agriculture gets hit hard when energy costs go up

Farmers are also feeling the pinch of higher diesel prices, and the worst may be yet to come. Fuel, fertilizer and chemicals account for roughly 15% of a farm's operating expenses. That all-important cold chain exacts a cost from growers and distributors as well.

"Our growing and harvesting sectors are very, very energy intensive, and they get hit hard when energy costs go up," said Ricky Volpe, a professor in California Polytechnic State University's agribusiness department and a former economist at the U.S. Department of Agriculture.

People already have seen some price impacts from higher energy costs - as well as higher costs for fertilizer, whose inputs also largely come from the Middle East - in supermarkets, he said.

"It's one of the reasons why tomato and lettuce prices have been so problematic so far in 2026," Volpe said. When dealing with higher costs, fruit and vegetable farmers usually have to pass those increases along to their buyers and distributors, and those increases will show up in grocery stores almost right away, he said.

Large-scale commodity crops such as corn, wheat and soybeans - which go into myriad processed foods as well as into sweeteners and animal feed - behave a little differently, he said.

"The timing and the mechanisms by which those commodities end up affecting our food prices are much more varied, and they take much more time to occur," Volpe said. "They're vitally important to our food supply chain, arguably more important."

Rising energy and fertilizer prices, for the most part, have not yet been factored into such crops because most were in the ground by the time the cost increases picked up.

"Those higher costs are going to translate into these commodity prices when they're harvested in the fall and into the early winter and 2027," Volpe said. It may take yet some more time for the higher commodity prices to translate into say, higher costs for bread, soda or beef. "We just haven't seen those impacts yet," he said.

The U.S. is already experiencing above-average food-price inflation this year due to factors such as tariffs and severe weather in many major agricultural growing regions around the world, Volpe said. "And I think that's going to accelerate in the back half of the year, when these high energy costs and fertilizer costs come to roost for our major agricultural producers," he added.

Some major producers may be able to negotiate better prices with their suppliers and reach agreements with their buyers about sharing some of the cost increases.

"If a small or midsize family farmer tries to take that stand, good luck. They're just going to get squeezed out of the market," Volpe said.

Electric school buses to the rescue

Meanwhile, some organizations that rely heavily on diesel are looking to wean themselves off reliance on the fuel to prevent future price fluctuations from having a major impact.

In Los Angeles, the school district is shifting to electric buses, a spokesperson said. The district operates roughly 120 diesel buses, along with 36 trucks and vehicles and about 220 pieces of diesel-powered equipment, which are all subject to rising fuel costs.

The volatility in fuel prices is one of the reasons the district has continued investing in its electric fleet as a long-term cost-management strategy, the spokesperson said. Switching a diesel bus over to electric can save between $73,000 and $173,000 per unit over its lifetime in fuel and maintenance costs, in addition to cutting emissions.

-Claudia Assis

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July 18, 2026 08:00 ET (12:00 GMT)

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