America.. Diesel Prices Reach Unprecedented Levels Due to the Iran War

- The price of diesel, the essential fuel that drives the global economy, reached its highest level ever on Friday, as the ongoing U.S. war with Iran continues to trigger waves of shock in the global energy supply chain. The sharp rise in diesel prices late this summer has added further inflationary pressures on businesses and consumers who have already been suffering from rising prices for years.

Analysts are warning of a severe shortage of diesel supplies in parts of the U.S. East Coast. According to data from the American Automobile Association (AAA), the average price of diesel has risen to $5.8500, surpassing the previous record of $5.816 set in June 2022 following the Russian invasion of Ukraine earlier that year.

While gasoline receives most of the attention due to its impact on consumers and its psychological dimensions, diesel is an important fuel worldwide. It powers trucks, tractors, trains, boats, and construction vehicles that form the backbone of the modern economy.

Bob McNally, founder and president of Rapidan Energy Group, said: "Gasoline is the attractive and visible fuel for people, while diesel is the silent and essential engine of work. It is the lifeblood of the economy." Rising diesel prices increase the financial burden faced by companies across various sectors, including agriculture, e-commerce, manufacturing, and construction.

These companies are likely to pass at least some of those additional costs onto consumers by raising prices. Diesel prices have jumped more than 60% since the beginning of this year, putting it on track to record the largest annual increase ever, according to a review conducted by the Afaq New Zealand data from the American Automobile Association (AAA) since 2000.

The previous record was set in 2021, after the COVID-19 pandemic, when diesel prices rose by 39%. The increase in diesel prices has cost American consumers about $44 billion - equivalent to nearly $340 per household - since the outbreak of the war with Iran in late February, according to cost tracking data from the Climate Solutions Lab at Brown University.

Although some oil shipments managed to leave the Middle East with the help of U.S. Navy escorts, this crude oil must be refined into gasoline, diesel, and jet fuel. This process has been disrupted due to the shutdown of three of the four main global refining centers: the Middle East (due to damage from the conflict), Russia (due to damage to refineries from the war with Ukraine and export bans), and China (due to export restrictions).

Tom Kloza, chief energy analyst at GasBuddy, warned in a post on X that the United States is facing a "potential diesel crisis" driven by a decline in commercial inventories to record low levels not seen in the modern era. He noted that the "zero point" for this potential crisis will likely be in the states of West Virginia, Virginia, North Carolina, South Carolina, Georgia, and Florida.

This is because diesel inventories in the South Atlantic region (from West Virginia to Florida) have decreased by 40% year-on-year, reaching their lowest level since federal data began being recorded at the end of 1990. Andy Lipow, president of Lipow Oil Associates, stated: "We have minimal commercial inventories in this part of the country, and there are sporadic cases of product shortages at distribution stations in this area."

Diesel prices have surged past $2 per gallon over the past year in most U.S. states, particularly in California, Arizona, New Mexico, Virginia, Texas, and North Carolina, according to data from the American Automobile Association (AAA).