The Federal Reserve Thinned Out Gasoline to Reduce Costs. Diesel Doesn’t Have a Similar Solution.

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

      Analysts and economists are increasingly raising concerns over a different statistic than the price of gasoline, one that has significant repercussions for the economy: the price of diesel.

      One year ago, the average price of a gallon of diesel fuel in the U.S. was $3.70. Today, as this recording is made, it’s $5.60. That's a 50% increase, with some projections suggesting it may reach a record $6 a gallon by the year's end. This isn’t good.

      America doesn't just run on coffee; it operates on diesel. Unlike gasoline, the government can’t manipulate diesel formulas to lower prices, nor can it dilute diesel as it tried with gasoline earlier this year.

      The reality is that our economy relies heavily on diesel fuel. It's in the semi-trucks and freight trains transporting your Amazon orders, the buses taking children to school, the tractors and combines harvesting our food, and even the fuel trucks supplying regular gas to local stations. Additionally, millions of heavy-duty pickup trucks are used by fleet operators and tradespeople in virtually every industry. The cost of diesel is an expense every business and municipality in America must consider, either directly or indirectly. Thus, when it sees a 50% increase, the strain is felt across the board.

      There’s no straightforward solution—especially as kids are going back to school, farmers are in peak harvest mode, and the holiday shopping season is around the corner. In the latest episode of The Drivecast, we discuss the cascading effects of the diesel price surge. How severe will it become, how far will the repercussions spread, and is $5 a gallon now the new norm?

      For those who haven’t tuned in before, The Drivecast is The Drive’s weekly podcast that takes an inside look at the major controversies, stories, and figures shaping the automotive industry and how our roads look today. Fueled by The Drive’s exclusive access, original journalism, and insights, we aim to make everyone feel like an insider.

      You can listen to The Drivecast on Spotify, Apple Podcasts, or Amazon Music. If you enjoy it, consider leaving a five-star review on your platform of choice to help spread the word. Got a suggestion, tip, request, or feedback? Drop us an email at feedback@thedrive.com. We promise to read every single message.

      Full Transcript

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

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

      Kyle: Ouch, tough topic.

      Caleb: Yeah, you mentioned we wouldn't discuss that on this podcast. But in reality, we often use a Kubota tractor, filling it up 5 gallons at a time, which lessens the impact slightly. Still, even with that frequency, the cost is definitely noticeable. I can’t complain as much as over-the-road truckers or farmers during harvest season, though—I really feel for them.

      Joel: Just think about how boats—wait, other people's boats use diesel. Thankfully, ours don’t; we run on 91 non-ethanol premium, which isn’t cheap, but at least it’s not diesel.

      Caleb: Exactly.

      Kyle: Nowadays, everything is costly. While many are accustomed to seeing diesel prices on gas station signs, most people don't pay attention to them because they don't typically drive diesel vehicles. It's just another figure out there. Historically, diesel was often cheaper than regular gasoline, and it’s an overlooked expense that influences literally every sector in this nation. Every business and product involves transport, production, or power through diesel fuel. It's a critical element that many overlook. With various high prices affecting consumers, those not using diesel might easily forget about it—until they can't anymore. So, Caleb, to summarize, what has caused diesel prices to rise significantly this year, particularly at a faster pace than gasoline?

      Caleb: There are several reasons, and at least two relate to international conflicts. The ongoing war between Russia and Ukraine plays a big part, as does the severe restriction of ship traffic through the Strait of Hormuz. It’s evident why limited traffic in the Strait of Hormuz is a concern—there isn't much oil being transported through there. The Russia-Ukraine situation is complicated for various reasons, but in terms of diesel, Russia is the world's second-largest exporter of refined fuel. Numerous Ukrainian drone attacks have successfully targeted Russian refineries, severely affecting their output. While crude oil supply is not as severely restricted, the issue lies in the refined fuel that consumers can actually use; its supply has become problematic. Low diesel supply doesn’t mean there’s less oil being extracted or refined; it's more about the inability to distribute refined fuel to consumers. Additionally, the global supply of diesel is impacted, as other countries also