Diesel Prices Are Soaring – Inflation May Be Next

Diesel Fuel Prices Are Skyrocketing

The national average for diesel fuel today is $6.23 per gallon. In September 2025 diesel fuel in the U.S. averaged $3.70 per gallon. That represents a 68% increase in 12 short months. In fact, today’s national average is the highest on record, and it will likely move higher in the coming months as the Iran War and the war between Russia and Ukraine persist. Ukraine has recently been successful using drones to strike Russian refineries. This is a strategic move because Russia receives a substantial portion of its revenue by exporting oil and gas. Causing damage to refineries could hurt Russia’s economy.

The price of diesel, like oil and many other items, is determined by supply and demand. When demand exceeds supply, prices rise and vice versa. Why is the cost of diesel fuel rising now? Primarily because of recent attacks on Russian refineries and the continuing escalation in the price of oil due to the war with Iran. Let’s bring the discussion closer to home and discuss the impact of higher diesel fuel in America.

Freight Transportation in the United States

The cost of goods in America is a function of the cost of manufacturing plus the cost of shipping, along with the available supply versus demand for a product. Again, when supply is low relative to demand, prices rise. How are goods transported in the U.S.?

Big trucks move about 11.5 billion tons (70% of all freight), trains move about 1.7 billion tons, about 766 million tons is moved over water, and 5.9 million tons of freight travel by air. All trucks and most trains use diesel fuel to transport goods across the country. Thus, diesel is the most common fuel used to move products from manufacturer to distributor to retailer. With the cost of diesel rising, soon it will cause prices to rise even more. I said soon because retailers may use existing inventory first before paying substantially more for new, higher priced inventory.

Where We Might See Higher Prices

Higher diesel fuel prices will push freight and production costs higher and will affect a wide array of everyday products including groceries, household goods, and just about everything that relies on big trucks and diesel-powered trains to move goods to consumers.

In the most recent report from the Bureau of Labor Statistics, gasoline (all types) rose 3.9% in August after falling in June and July. For the past 12 months gasoline prices rose by 27.4%. Fuel oil rose 10.1% in August and 52% for the past 12 months.

If the war with Iran drags on and Ukraine continues to attack Russian refineries, the cost of diesel fuel will continue to rise and push inflation higher. Of course, if inflation runs too hot and consumers decide to hold off on major purchases, we could experience an economic slowdown which would reduce demand and bring the supply-demand dynamic in line. If that happens, then prices could fall. But in the meantime, it’s a good bet that both wars will continue for the foreseeable future.