Diesel Prices to Remain High Through 2027 Amid Global Tensions

Kansas State University agricultural economist Gregg Ibendahl says diesel prices will remain high through 2027 due to ongoing global tensions and supply chain disruptions. The US war with Iran has hindered shipping in the Gulf region, while Russia's invasion of Ukraine has weakened its diesel exports. This combination of factors is driving up pump prices, with Kansas' current average at $6.29 per gallon and a national average of $6.51.

Ibendahl attributes about 70 cents of the increase to rising crude oil costs, which have risen from the low to mid-$70s to over $100 a barrel. The remaining cost is due to supply disruptions at refineries and transit issues, as Russia's damaged refineries limit its diesel exports. US refineries are operating near capacity, but overseas demand has drawn domestic supplies offshore.

The high diesel prices will hurt farmers who use the fuel for tractors, with a north-central Kansas farmer using four gallons to grow one acre of corn. With diesel at $2.25 above normal, this adds up to an extra $10 per acre, which can be the difference between profit and loss for many operations.

The increased costs will eventually be passed on to consumers through higher prices for goods transported by truck, which is the primary mode of transportation in the US.