The average price of diesel fuel in the United States has risen above $5 per gallon, while regular gasoline is approaching $4, according to the American Automobile Association (AAA). These levels match the highs seen before the June memorandum of understanding between the US and Iran.
Price surge driven by geopolitical uncertainty
The increases serve as a stark reminder to consumers and truckers of the costs associated with the Iran conflict and the unpredictable rhetoric from both Washington and Tehran. One year ago, the average price for a gallon of diesel was $3.72, nearly $1.25 less than current prices.
Earlier this week, Iran declared the Strait of Hormuz closed after both Iran and the US claimed to be guarantors of safe passage through the strategic waterway. The US then announced a blockade on all ship traffic to or from Iranian ports.
Impact on consumers and supply chains
AAA spokesman Robert Sinclair Jr. said diesel price hikes lead to rising costs across the board. “The impact is universal. Everything gets to the retail consumer by diesel-burning truck,” he said.
The renewed diplomatic uncertainty and new US and Iranian airstrikes are driving prices higher at the pump and on international wholesale markets. The price of a barrel of oil stands at about $81, down from highs during the most intense part of Trump’s war in Iran but driven recently by erratic news from the White House.
Market volatility and policy whims
On Monday, the president suddenly announced the US would take over the Strait and charge 20% of the value of any cargo going through the waterway, but then dropped the plan. Sinclair said price hikes are happening because of production declines and public commentary from the White House. “Trump puts in on [the] 20% [transit fee] and then it’s gone. So much of this is happening on whim that it’s really impossible. The markets respond to whim. This is a market subject to rumors and other kinds of activities rumor or imagined,” he added.
