US diesel hits a record $5.85 a gallon as the Iran war squeezes supply

The American Automobile Association put the national average retail price of diesel at $5.85 a gallon on 4 September, a record. The previous peak was $5.82 in June 2022, after Russia invaded Ukraine. A year ago the same average was $3.71.

The print rose $0.24 in a week and about 25 cents across four days. FreightWaves noted that the AAA figure on the Friday before US-Israeli strikes on Iran began in late February was $3.758. The move since then is about $2.10 a gallon.

Gasoline is expensive. Diesel is the one that moves goods.

Regular gasoline averaged $4.15 a gallon. California's average was $5.81. Indiana's $3.44 would have been a national shock a year ago, when the US average sat at $3.20. AAA said the country is on course for its most expensive Labor Day weekend on record at the pump. The previous Labor Day high for regular gasoline was $3.82 on 3 September 2012. The national average has never been above $4 on that holiday.

Diesel is the fuel that matters for freight. Trucks, trains, barges, farm equipment and construction plant run on it. When that price sets a record, the cost is already inside food, housing materials and anything that travelled on a highway.

Washington state averaged $6.81 a gallon for diesel, against $5.03 a year earlier. Western states pay more because of tax design and distance from refining centres.

Two wars, one middle distillate

Diesel is a global product. The Iran war has disrupted crude and product flows through the Gulf. The Russia-Ukraine war had already tightened middle distillates in 2022. Those two shocks now sit on the same barrel.

Wholesale ultra-low-sulphur diesel on the CME was a different story on 4 September. The contract was down about 12 cents to $4.4739 a gallon by mid-morning, after an 8.86-cent drop the day before. Retail prices lag futures. The record at the pump can print on a day when the paper market is already falling.

President Trump has said he will cut gasoline prices through an oil arrangement with Venezuela. Reuters/Ipsos polling cited by the BBC put his approval rating at 33 percent, with 31 percent of respondents approving of the Iran conflict. Fuel is one of the prices those numbers are tracking.

What a record diesel number does next

Retail diesel at $5.85 does not stay in the trucking accounts. Contracts that index fuel surcharges will reprice. Farm diesel bought for harvest will cost more than the same tank last September. State highway budgets that buy diesel for snow fleets will feel it when winter arrives.

The June 2022 record was a Russia shock. This one is an Iran shock stacked on top of that earlier tightness. AAA's number is a lagging camera. The question for September is whether the drop in futures reaches the pump before Labor Day traffic pays the $5.85 print in cash.