Breaking 2022 Records! US Diesel Prices Hit Record High; Is Trump's "Energy Card" Failing to Work in the Midterm Election Campaign?

U.S. diesel prices are breaking historical highs, further transmitting the impact of rising energy costs to areas such as inflation, agriculture, and logistics, and also bringing new political pressure to the Trump administration. With less than two months until the U.S. midterm elections, the continued rise in fuel prices may become an issue that the government cannot avoid.

According to data from the American Automobile Association (AAA), the average retail price of diesel in the United States hit $5.85 per gallon for the first time on Friday, surpassing the record high set in 2022. At the same time, the average retail price of gasoline in the United States also rose to $4.15 per gallon, a record high for that period.

Amrita Sen, founder of energy consultancy Energy Aspects, said that unless high prices begin to suppress demand, there is currently no clear path to solving the diesel supply shortage.

The impact of soaring diesel prices has begun to spill over into the real economy. Food giants JM Smucker and Campbell's both told analysts that logistics cost inflation is higher than expected, with Campbell's projecting double-digit increases in logistics costs for fiscal year 2027. Data released by the U.S. Department of Agriculture last Thursday showed that U.S. farmers' real income is expected to decline by 2.5% in 2026, while fuel costs are projected to rise by nearly 30% and fertilizer costs by 15%.

For the Trump administration, which had promised to lower energy prices and reduce the cost of living, the continued rise in diesel prices undoubtedly brings new political pressure.

Multiple shocks on the supply side combined mean that diesel supply is unlikely to ease in the short term.

The core issue behind this record-breaking rise in diesel prices lies in the multiple shocks to global refining capacity and the continued tightening of refined oil supply.

The Strait of Hormuz remains blocked, restricting crude oil shipments to major Asian refineries; multiple large refining facilities in the Middle East have been attacked and damaged; and several Russian refineries have been attacked and forced to shut down. According to reports, energy industry executives recently stated that approximately 5 million barrels per day of global refining capacity is currently shut down.

Meanwhile, the US and Europe have also shut down some refineries over the past year. S&P Global analyst William O'Neil stated that California alone has lost approximately 17% of its refining capacity due to closures. Canada's largest refinery is currently undergoing seasonal maintenance, and more than half of its products are exported to the northeastern United States.

O'Neil stated that the U.S. diesel supply is "very tight," and there is currently virtually no way to avoid widespread and persistent price pressures.

The surge in exports further squeezed domestic supply in the United States, and inventories fell to historic lows.

Amid global diesel supply shortages, the United States is becoming an important source of supply, but increased exports are further reducing domestic inventories.

According to data from the U.S. Energy Information Administration (EIA), U.S. diesel exports averaged 1.77 million barrels per day in the four weeks ending August 28, an increase of about 31% compared to the same period last year.

Meanwhile, U.S. domestic diesel inventories continued to decline. Diesel inventories in New England and the southern Atlantic coast fell last week to their lowest level since the EIA began tracking the data in 1990; California inventories also fell to 1.16 million barrels from 1.73 million barrels a year ago.

Andy Lipow, president of Lipow Oil Associates, said that with inventory buffers already very limited, "any supply disruption could have a multiplier effect."

With the seasonal demand peak approaching, diesel prices may face further downward pressure.

The current supply shortage comes as U.S. diesel demand is about to enter its seasonal peak.

As farmers prepare for the fall harvest season, demand for agricultural diesel will increase significantly; much of the northeastern United States is also less than a month away from switching to heating oil. Meanwhile, some refineries are entering their seasonal maintenance periods, which could further reduce available market supply.

Energy Aspects predicts that starting in October, the diesel market will face triple pressures from the harvest season, early winter heating demand, and refinery maintenance plans.

The agency noted that European countries have so far released only about 10% of the 73 million barrels of fuel reserves pledged at the beginning of the Middle East conflict. If fuel prices surge further in the winter, European countries may accelerate the release of the remaining reserves to alleviate supply pressures.

The Trump administration's options are limited, and the controversy over diesel export restrictions has reignited.

Faced with record fuel prices, the Trump administration convened a meeting this week with refining industry executives, urging companies to take further steps to lower prices, including considering building new refineries. However, refineries are already maximizing the utilization of existing capacity to achieve higher profits, showing limited interest in new multi-billion dollar refinery projects.

The report, citing analysts, pointed out that the Trump administration has very limited policy tools at its disposal to alleviate domestic diesel price pressures in the short term, and restricting diesel exports is one option. This has reignited the controversy surrounding export restrictions. U.S. Energy Secretary Chris Wright has repeatedly and publicly opposed restricting energy exports.

Energy Aspects suggests that the Trump administration could consider easing some fuel regulations to increase diesel production, while simultaneously strengthening escorts for diesel tankers passing through the Strait of Hormuz.

Inflation and political pressures combined weigh on the midterm election outlook.

Soaring diesel prices are gradually translating energy cost pressures into political pressure. The Atlantic Council points out that rural areas in the United States are being significantly impacted by rising diesel prices, with Wyoming, North Dakota, and Alaska ranking among the highest in the nation for per capita diesel consumption in 2024.

According to reports, Democratic members of the Joint Economic Committee of Congress stated in July that American farmers incurred an additional $1.4 billion in expenses due to rising diesel prices during the planting season alone. Boston truck driver Scott Litchfield stated that the freight companies he speaks with are currently incurring an extra $480 to $640 per day due to rising fuel prices and have begun raising freight rates for some customers.

Since the outbreak of the US-Iran conflict, US diesel prices have risen by 56%, exceeding the price of a gallon by $2.14 a year ago. Although current prices, adjusted for inflation, have not yet surpassed the real highs of 2022, the continued rise in diesel prices undoubtedly poses new pressure on the Trump administration, which has pledged to lower US energy prices and make a lower cost of living a key political demand.

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