The Federal Reserve Reduced Gasoline Standards to Lower Prices. Diesel Lacks a Similar Solution.

      Artur Widak/NurPhoto via Getty Images, edited by the author

      Analysts and economists are beginning to raise concerns over a different figure than the cost of gasoline, a number that holds significant implications for the economy: the price of diesel.

      One year ago, the average price of a gallon of diesel fuel in the U.S. stood at $3.70. Currently, as of this recording, it has risen to $5.60—a 50% increase, with some forecasts predicting it could reach a record $6 a gallon by year-end. This is concerning.

      America doesn’t merely run on Dunkin—it operates on diesel. Unlike gasoline, the government cannot alter diesel formulas to try to bring down prices, nor can it dilute diesel like it did with gasoline earlier in the year.

      The reality is that the economy is heavily reliant on diesel fuel. It's what powers the semi-trucks and freight trains delivering your Amazon items, the buses transporting children to school, the tractors and combines in agricultural production, and even the tanker trucks delivering regular gasoline to local stations. Furthermore, millions of heavy-duty pickup trucks used by fleet operators and tradesmen across various industries also rely on diesel. The diesel price is a cost all businesses and municipalities in America must account for, either directly or indirectly. Therefore, a 50% hike in diesel prices... well, the repercussions can only be temporarily absorbed.

      There’s no straightforward solution, especially as students return to school, farmers reach their peak harvest season, and the holiday shopping season approaches. In the latest episode of The Drivecast, we delve into the cascading effects of the diesel price surge. How severe will it become, how widespread will its impact be, and is $5 a gallon becoming the new standard?

      New to us? The Drivecast is The Drive‘s weekly podcast that takes a look behind the controversies, narratives, and figures shaping the automotive industry and the state of our roadways today. With The Drive's insider access, original reporting, and insights, The Drivecast aims to make everyone feel like an insider.

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      Full Transcript

      Kyle: So, Caleb, let’s clarify things. How much diesel do you purchase?

      Caleb: Honestly, I should be buying more than I currently do since my 7.3 Ford Power Stroke has been out of commission for far too long.

      Kyle: Ah, touchy topic.

      Caleb: Yeah, you said we wouldn’t bring that up on this podcast. But seriously, we have a Kubota tractor that we use frequently, filling it up around 5 gallons at a time to manage costs better. Still, even filling it a few times a month, the pain is noticeable. It’s not nearly as bad as what long-haul truckers or farmers experience during harvest time. They definitely have it tougher.

      Joel: Just imagine if boats—well, other people's boats use diesel. Thankfully, our boats operate on 91 non-ethanol premium gas, which, while expensive, isn’t diesel.

      Caleb: Come on, let's be real.

      Kyle: Nothing is cheap nowadays. Diesel prices—many are accustomed to seeing them on gas station signs, but most people overlook them since few drive diesel vehicles. It often goes unnoticed. Diesel used to frequently be cheaper than regular gasoline, making it an invisible cost that influences almost everything in this country. Virtually every kind of business and product involves transportation, production, or operation powered by diesel fuel. It's a crucial factor that many ignore. With all the other price hikes we’ve been facing, if you don’t use diesel directly, it’s simply overlooked—until it isn’t. So, Caleb, in summary, why has diesel become so costly over the past year, particularly recently compared to regular gas?

      Caleb: There are several factors, with at least two tied to international conflicts. The ongoing war between Russia and Ukraine, along with significant restrictions on ship traffic through the Strait of Hormuz, play pivotal roles. While it’s evident why limited access to the Strait matters—since it restricts oil transport—the Russia-Ukraine situation is problematic for many reasons. In this context, Russia is the world's second-largest exporter of refined fuel. Several successful Ukrainian drone strikes on Russian refineries have severely impacted their production capacity. The supply of crude oil isn’t too low or hindered as a bottleneck in this process; the issue lies with refined fuel—what's actually usable. When we mention low diesel supplies, it’s not because less oil is being extracted or transported to refineries; it’s that it simply can't be delivered from refineries to consumers. A vital point is that