US Diesel Price Hits Record $6.49 Amid Hormuz Crisis

The US diesel price has hit a record high of $6.49 per gallon, according to the latest data from AAA. This represents a 73% increase over the pre-Hormuz crisis level of $3.75 per gallon on February 27.

The disruption in the Strait of Hormuz, which accounts for one-fifth of global oil and LNG supplies, has led to a fundamental shift in global energy flows. The US Energy Information Administration says that diesel prices reflect not only crude costs but also refining margins, distribution expenses, taxes, and the 'crack spread', the difference between crude input costs and wholesale diesel prices.

Tight global distillate supplies and elevated crude prices have pushed both crude costs and refining margins higher. The disruption around Hormuz has compounded this pressure, forcing producers and traders to rely on alternative routes while reducing or delaying exports.

Diesel's importance extends beyond fuel for vehicles; it powers the US freight network, including heavy trucks, trains, farm machinery, and fishing vessels. A diesel shock can spread through the economy even when consumers are not directly buying diesel themselves, raising freight rates, farm costs, food prices, industrial costs, and ultimately consumer prices.