Iran war pushes diesel – the economy’s lifeblood – to record high prices, with no relief on the horizon
The country, and the world, have been losing diesel refining capacity for many years and can’t just ramp up production to fill the shortages.
In recent months, diesel fuel prices in the United States have reached record highs, averaging $6.28 per gallon as of September 14, 2026. This price surge is expected to have far-reaching effects on the entire U.S. economy, as diesel is crucial for freight transportation, farming, and construction, among other sectors. The high prices are a result of several factors that have built up for years and were exacerbated by the ongoing U.S. war against Iran.
Environmental protection regulations on oil refineries and Russia's war with Ukraine have been contributing to the situation. However, the current crisis was pushed into a crisis by the conflict in the Persian Gulf. The strait of Hormuz, a key route for oil and refined products shipments, has been closed for over six months due to Iran's actions, leading to a global shortage of diesel.
U.S. oil refineries have been making significant profits during this crisis. By late August 2026, diesel prices had increased by 67% compared to September 2025's national average of $3.75 per gallon. The price hike began in January 2026, before the initial U.S.-Israel attacks on Iran in late February, when diesel averaged $3.52 per gallon.
The decline in diesel refining capacity is a significant factor in the price increase. Since 2006, U.S. federal regulations have required refineries to produce diesel with much lower sulfur content, resulting in cleaner fuel but also adding between 5 and 9 cents per gallon to costs. Furthermore, refineries have had to invest heavily in expensive equipment to comply with these regulations, taking years and billions of dollars to implement.
The current refinining landscape in the U.S. is challenging. Only one refinery was built in the past 50 years, and it only meets less than 0.2% of U.S. demand. Two refineries shut down in 2025 due to poor economic performance, and more than a dozen others have converted to producing renewable diesel, which can reduce actual fuel production by at least half. As a result, refineries are operating at near maximum capacity, but distillate production, which includes diesel, is still lower than in 2025.
Global factors, such as the global squeeze on diesel supplies and the ban on Russian diesel exports, have also contributed to the price surge. In September 2026, the U.S. Senate Majority Leader proposed a ban on diesel exports to increase domestic availability. Refiners are capitalizing on the low supply and limited production capabilities, charging more for diesel fuel than ever before. This price increase ultimately leads to higher costs for truckers, drivers, shipping companies, and ultimately, consumers.
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