U.S. Diesel Hits Record $6.50 as Global Fuel Crunch Deepens

U.S. diesel prices surged to a record $6.50 per gallon this weekend, reflecting a worsening global fuel shortage that could impact economies worldwide, including the largest economy in the world. The national average price of diesel jumped from $6.00 two weeks ago to the current high of $6.5050 per gallon, according to data from AAA.

This sudden increase, from $6.00 to $6.50 in just four weeks, marks the steepest jump since 2022, surpassing the previous record and breaking the $6 per gallon threshold for the first time ever.

The price surge is primarily driven by the high international Brent oil benchmark, currently at $100 per barrel, coupled with the ongoing fuel supply constraints from the Middle East and Russia. The jump in diesel prices has been matched with a rise in U.S. gasoline prices, which now average $4.4761 per gallon, up from $4.1044 a month ago and $3.1894 per gallon at this time last year.

The combined impact of these rising fuel prices may influence voter behavior in the upcoming mid-term elections in early November and could contribute to a worsening inflation outlook, potentially slowing down the economy.

Fed Chairman Kevin Warsh recently acknowledged the persistent issue of high inflation, stating that "The plain fact is that inflation is too high, and has been for too long." In response, the Federal Reserve raised the key interest rate for the first time since 2023. Earlier this year, Goldman Sachs had estimated a 30% chance of recession within 12 months, but this probability has since decreased to 15% as global and U.S. economies have demonstrated resilience in the face of supply disruptions.

Goldman Sachs Chief Economist Jan Hatzius noted that if another shock occurs, the recession risk estimate would be raised once again.