Four weeks before the November 3 midterms, the average US price of on-highway diesel stands at about USD 6.38 a gallon, according to the Energy Information Administration (EIA).

A week earlier it hit USD 6.53, an all-time high that beat the previous record of USD 5.81 set in June 2022 after Russia invaded Ukraine.

Diesel cost about USD 3.81 a gallon in late February, just before the United States and Israel went to war with Iran. It has since risen by roughly two-thirds, far outpacing petrol, which the EIA puts at about USD 4.47. The gap matters.

Petrol is mostly a consumer fuel. Diesel is a producer fuel, powering the trucks that stock supermarkets, the combines bringing in the corn and soybean harvest, freight trains, construction equipment and backup generators. When it gets dearer, the cost travels through almost everything Americans buy.

A crisis made abroad

The roots of the squeeze lie far from American forecourts. The closure of the Strait of Hormuz took about a fifth of the world’s oil off the market, and the Middle East supplies a disproportionate share of the crude used to make diesel, which is why diesel has climbed faster than petrol.

Brent crude broke through USD 100 a barrel in early September as US and Iranian strikes in the strait intensified.

The war in Ukraine has compounded the damage. Ukrainian drone strikes on Russian refineries have removed between 800,000 and 1 million barrels a day of diesel from the market, according to S&P Global Energy, and Moscow has extended its own diesel export ban until the end of October.

Chinese refiners have reportedly suspended fuel exports for October to protect domestic stocks.

That leaves the United States in an odd position. It is the world’s largest diesel exporter, shipping about 1.5 million barrels a day this year against domestic use of about 4.1 million barrels a day.

Its refineries were running at roughly 97% of capacity in mid-September. Yet because diesel is priced on a global market, a shortage in Rotterdam or Singapore lifts the price in Iowa too.

The energy security paradox
For an administration built around “energy dominance”, the episode exposes an uncomfortable truth. Producing more oil than anyone else does not shield American consumers from a global shortage of refined fuel.

Domestic distillate stocks, which cover diesel and heating oil, fell to about 106 million barrels in early September, down from about 121 million a year earlier and the lowest level for the time of year since records began in 1982.

The buffers are thin. The Northeast Home Heating Oil Reserve, the only federal stockpile of ready-to-use distillate, holds about 1 million barrels, a sliver of what the region burns in a cold winter.

Washington has already pledged 172 million barrels from the Strategic Petroleum Reserve to a coordinated International Energy Agency (IEA) release in March, and it has repeatedly waived the Jones Act, the century-old law reserving domestic shipping for US vessels, so foreign tankers can move fuel between American ports.

Washington then turned the threat into leverage, asking European governments to release around 120 million barrels of diesel from their strategic reserves over 180 days or risk losing American supply. The UK alone relies on the United States for about 30% of its diesel.

Europe gave ground, though not all of it. On October 2, G7 leaders agreed to a coordinated IEA release of 100 million barrels of diesel and crude over four months, with a substantial diesel release frontloaded into the first 20 days, and pledged to avoid energy export restrictions among themselves.

Trump hailed the deal and said an export ban “was never really on the table”.

Economists had warned that a ban would backfire. Refiners cannot simply stop making diesel without cutting output of petrol and jet fuel, and the American Petroleum Institute cautioned that most Americans would end up paying more.

Analysts pointed to Richard Nixon’s 1973 soybean export ban, which pushed buyers towards Brazil for good. The deeper cost would have been America’s reputation as a dependable supplier.

From the pump to the shopping basket
Energy prices in the consumer price index were 16.3% higher in August than a year earlier, holding headline inflation at 3.4%.

Producer prices took a sharper hit, with diesel jumping 24.1% in August alone.

On September 16, the Federal Reserve raised interest rates for the first time since 2023, lifting its benchmark to a range of 3.75% to 4%, and most policymakers expect at least one more increase before the year ends.

Trucking, which moves most American goods, is where the shock lands first.

Dry van spot rates paid to carriers were 34% higher year on year in mid-September, according to DAT Freight & Analytics.

In Nevada, the state truckers’ association says fuel surcharges are so steep that a USD 1,000 haul can now cost USD 1,900, and fuel has outpaced every other expense its members face.