US Diesel Prices Rise Past $6 a Gallon for First Time Ever

(Bloomberg) -- Diesel prices rose above $6 a gallon for the first time ever, raising the risk of further energy-driven inflation just ahead of peak demand season for the fuel.

Prices stood at a national average of $6.0556 a gallon, according to the American Automobile Association. In California, they were near $8 a gallon.

The workhorse fuel of the global economy, diesel is used in everything from power generation and home heating to farm equipment and tractor-trailers. While few Americans are exposed directly to diesel in their day-to-day purchases, it's a key input in food prices, the cost of shipping and construction — meaning the impact of record-high prices will trickle down to consumers. Demand also picks up heading into the fall as heating and agricultural consumption rise.

Geopolitical turmoil has sharply curtailed the world's ability to produce and ship sufficient quantities of the fuel. In Russia, months of Ukrainian drone strikes on refineries have triggered a diesel export ban. And in the Middle East, stop-and-start shipping through the Strait of Hormuz and lost refining capacity have limited both production and distribution, with fuel cargoes still well below pre-war levels.

Fighting around the vital Strait of Hormuz and the Bab al-Mandeb Strait has also picked up this week, and the US and Iran appear to be digging in for a protracted war — which could keep energy prices higher for longer.

The soaring costs are particularly problematic for President Donald Trump's Republican Party with just over 50 days to go before midterm elections. They could prove critical in Maine, where the highest proportion of households nationally use heating oil to warm their homes, and in agricultural states like Ohio, Kansas and Iowa.

But the White House has few policy levers left to pull to lower domestic prices, save for further releases from the Strategic Petroleum Reserve or an export ban. US Interior Secretary Doug Burgum said every idea is on the table when asked about diesel export controls, but said that such measures have raised prices in the past.