Diesel Price Spike Threatens Trump's Economic Legacy

US President Donald Trump is focusing on diesel prices due to their potential impact on inflation and the economy. Diesel is a crucial fuel that powers trucks, ships, and machinery, accounting for nearly 30% of global oil consumption.

The current price spike in diesel is attributed to a severe shortfall in refining capacity, particularly in the Middle East and Russia. Air strikes have damaged refineries in the Gulf, while Ukraine's drone attacks have crippled Russia's refining network.

Russia has imposed a diesel export ban, leading to a two-thirds decline in combined exports from Russia and the Gulf since 2025 levels. European diesel futures hit a record $210 per barrel this week, with US retail diesel prices topping $6 per gallon for the first time.

The Trump administration is concerned about the potential impact of high diesel prices on manufacturing, transportation, and food production. The price spike could push up US inflation broadly and durably, ultimately dragging down growth.