US diesel average hits record $6.27 a gallon

Fed expected to hike rates as energy costs rise

The average price of a gallon of diesel in the United States hit a fresh record of $6.27 on Tuesday, according to the American Automobile Association. The increase extends a run of fuel-market tightening that first pushed diesel above $6 a gallon on Friday and follows attacks on Middle Eastern pipeline infrastructure and a Russian diesel export ban.

A year ago, the average price for a gallon of diesel was $3.69, according to AAA. Prices had jumped at the start of the conflict before cooling as US refiners ramped up production. The renewed climb above $6 comes as those relief supplies have been drawn down and additional pressures have emerged.

In California, the average price of diesel was $8.21 a gallon on Tuesday, the AAA said.

Higher diesel prices are feeding into broader expectations that the Federal Reserve will raise interest rates at its Wednesday meeting. Energy-cost inflation has strengthened the case for tightening, even as the administration of President Trump has repeatedly called for lower interest rates. Trump made easing the cost of living central to his 2024 reelection campaign.

The administration has tried to expand the country’s fuel-making capacity while playing down persistent speculation that it is seriously weighing a temporary ban on US exports of refined products such as diesel. ING analysts said any such ban is unlikely to lower prices over the long run. The bank said a ban could offer some immediate relief but would eventually weigh on refinery margins and lead refiners to cut run rates. The loss of supply would mean higher prices over the longer term, ING said.

The fuels market has become considerably tighter as the war progresses. Easy-to-access oil stored on ships is being used, while strategic reserves have been drawn down. Hopes that increasing oil flows from the Middle East would help ease the pressure were dented after an attack last week on a crucial crude pipeline in Saudi Arabia that helps bypass the Strait of Hormuz. That attack has stranded at least 2.5 million barrels a day, analysts estimate.

A Russian ban on diesel exports following Ukrainian drone attacks on its refineries has added to the lost volumes.

Diesel is a key part of the global economy, fueling trucks that move food and manufactured goods, heavy equipment at construction sites, and ships at sea. It is also widely used for heating. A prolonged supply crunch can ripple through the economy, pushing up freight rates and the cost of food, construction and household fuel.