The price of gasoline may have lowered in recent months, but the rising price of diesel will boost expenses everywhere.
Key Details
- Without enough diesel to fuel trucks, trains, barges, tractors, and construction equipment, goods and services are likely to grow more expensive for consumers.
- A year ago, a gallon of diesel cost around $3.64. Now that price is $5.36, according to the American Automobile Association.
- Diesel prices don’t have as immediate an effect on consumers, but the extra cost for distributors could be passed along to their customers.
- In addition fueling supply lines, some homes—particularly in the New England region—are heated by diesel.
- “It’s an inflation accelerant, and the consumer ultimately has to pay for it,” Oil Price Information Service head analyst Tom Kloza said.
- Diesel prices remain high due to shortages caused in part by Russian sanctions, refinery closures, and regulations on fuel transportation.
Why it’s news
Higher diesel prices will quickly affect the average consumer, both in the price of goods and the ready availability of goods. Higher transportation costs could lead to distribution companies cutting back on the number of trips trains and trucks make.
Some trucking companies have already doubled their spending on fuel.
High fuel prices could be damaging to farmers during the harvest season as their equipment largely relies on diesel. Greater expenses will leave farmers with smaller profit margins.
Gasoline and diesel prices are linked to oil prices which quickly rose after Russia invaded Ukraine at the beginning of this year. Though gasoline and diesel are connected, diesel prices have risen 40% while gasoline rose 11%.
Diesel prices have risen more quickly than gasoline due to a worldwide scarcity of the fuel. Too few refineries remain open to meet the diesel demand. Cutting off Russian exports of oil exacerbated the problem. Diesel supply is currently at its lowest since 1982.
Refineries in both the U.S. and Europe have been closing for one reason or another over the last several years. About 5% of U.S. refineries and 6% of European refineries are permanently closed.
