Among the many parts of the economy that U.S President Donald Trump’s war in Iran has fouled up are the energy markets. And one area has been hit even harder than most: diesel fuel.
The cost of diesel fuel has skyrocketed in the past two months—U.S. diesel prices are up 60 percent over last year—because of the U.S. war on Iran, which has knocked out oil fields, refineries, and energy flows.
Among the many parts of the economy that U.S President Donald Trump’s war in Iran has fouled up are the energy markets. And one area has been hit even harder than most: diesel fuel.
The cost of diesel fuel has skyrocketed in the past two months—U.S. diesel prices are up 60 percent over last year—because of the U.S. war on Iran, which has knocked out oil fields, refineries, and energy flows.
Unless you have operated large equipment or heavy machinery, you may not be familiar with diesel—but the fuel makes the world go round, and there’s less of it now than there used to be. That spells stalled tractors, big rigs that aren’t moving, and a lot of pain for a world built to run on this particular fuel. Everything you buy or eat runs, in the end, on diesel.
Diesel is a “major driver of the economy,” said Koen Wessels, the head of demand at Energy Aspects, a London-based energy consultancy.
For the Trump administration and Republicans, higher prices could pose a risk in the run-up to the high-stakes midterm elections in November, as voters across the country grapple with the painful economic fallout of the ongoing war. Despite the U.S. leader’s outward optimism that the conflict will be “over quickly,” continued uncertainty surrounding the Strait of Hormuz—the vital maritime chokepoint that Iran has been strangling—means that shippers and insurers aren’t holding their breath.
The war in the Gulf is particularly alarming not just because it trapped 15 million barrels of crude a day and 5 million barrels of petroleum products, but also because the medium-to-heavy and sour blend of Middle East oil is ideal for refiners to make products such as diesel and jet fuel.
U.S. crude oil, which is sweeter and lighter, produces more gasoline, which is why the United States still imports heavy crude for its Gulf Coast refinery complex despite being the biggest oil producer in the history of the world. That dependence is especially true for Asia, which is the largest customer for oil coming from the Gulf region.
Global benchmark oil prices dropped again recently due to hopes of a U.S.-Iran peace accord, but that does little to ease the bottlenecks that have bedeviled refiners around the globe, which means that the costs for almost every part of the economy will stay higher for at least the next few months. That’s bad news for farmers, truckers, shipping lines, and the people who buy what they make and move.
“It propagates throughout the entire economy, because we’re all dependent on diesel fuel for carrying our freight and goods,” said Kevin Book, managing director of ClearView Energy Partners, a consultancy.
In the United States, perhaps the biggest immediate blow is being felt by truckers, who have historically moved nearly three-quarters of all goods and are the nation’s top buyer of diesel. Around two-thirds of the diesel that is consumed across the country is in trucks, according to Linda Giesecke, director of refined products at Rapidan Energy Group.
Soaring diesel prices are already straining the sector. UPS and FedEx, two of the biggest trucking companies in the United States, are getting hammered by higher diesel costs (or, more accurately, their customers are). But about half of the truckers in the United States are independent operators, Book said. “This cuts into their expense line, cuts into their profits very significantly, and makes it harder for them to run profitable businesses contracting for freight delivery,” he said.
And those pressures won’t stay in the trucking sector. Higher diesel costs are ultimately passed down to consumers in the form of higher delivery fees or a higher cost of goods, experts said.
“It feeds through to all the goods that we’re buying because moving them has simply become more expensive,” Giesecke said.
It’s not just freight that will bear the fallout of higher diesel prices, either; agriculture, too, is set for deeper disruptions. The war has already clobbered farmers globally, as the conflict and effective closure of the Strait of Hormuz have choked the energy and trade flows underpinning global agriculture.
Fertilizer prices in particular have shot up due to the war. The American Farm Bureau Federation, the country’s largest general farm organization, conducted a survey in April that found that many American farmers can no longer afford fertilizer. Out of a survey of more than 5,700 farmers, 70 percent of respondents said that the high price of fertilizer prevents them from purchasing all the supplies they need.
Surging energy costs will only compound those challenges, further squeezing farmers who rely on diesel to power their agricultural equipment and farm machinery.
“Farmers’ margins have declined so much over the last couple of years, so this is further pressure on that,” said Joseph Glauber, a former chief economist at the U.S. Agriculture Department who is now at the International Food Policy Research Institute. “That is just another cost they’re bearing at a time when prices for their commodities aren’t really improving much.”
With higher diesel prices around the world, communities are staging protests to express their outrage. In Ireland, protesters have taken to the streets in their tractors and trucks to show their frustration with surging diesel prices; Norway has seen similar demonstrations.
Facing public alarm, governments have rushed to step in. In Vietnam, the government has asked certain industries to conserve fuel, while China has restricted its typical domestic fuel price hikes in an effort to shield consumers. Even as global prices have risen, India, too, has kept retail prices of diesel and gasoline the same as before, although there are now concerns that could change.
The supply chain chaos is likely here to stay. Last week, U.N. Secretary-General António Guterres warned in a post on X that even if restrictions on flows through the Strait of Hormuz were lifted immediately, “supply chains will take months to recover, prolonging lower economic output and higher prices.”
“We confront the spectre of a global recession—with dramatic impacts on people, on the economy, and on political and social stability,” he said.
