The nationwide average price for diesel fuel surpassed $6 per gallon for the first time on Friday, driven by supply disruptions from the conflicts in Ukraine and the Middle East, which are pushing up transportation costs across the entire economy.

Data from the American Automobile Association (AAA) shows that the cost for truckers and farmers to fill up semi-trucks and agricultural tractors has risen roughly 63% compared to the same period last year. The national average diesel price now stands at $6.0556 per gallon.

In California, the nation's leading agricultural state, diesel prices are even higher, reaching $7.9827 per gallon. The sharp escalation of the US-Iran conflict this month has sent crude oil prices soaring, which in turn has driven up fuel costs. US crude futures closed above $100 per barrel on Thursday for the first time since May, with the September contract accumulating a gain of about 20%.

Where the real pressure lies

While everyday consumers tend to focus on retail gasoline prices, diesel is the true lifeblood of the economy, according to Bob McNally, President of Rapidan Energy Group, who spoke on Tuesday. He noted that rising diesel costs eventually get passed on to consumers, showing up in the prices of food, various consumer goods, and energy.

Trucks, trains, and ships rely on diesel to transport goods to market; farmers use diesel-powered equipment for planting and harvesting; and in some cases, diesel is also used for home heating and electricity generation. "The impact of diesel is more insidious, more costly, and more widespread," McNally stated. "With oil prices continuing to climb, this is a very real risk."

Patrick De Haan, head of petroleum analysis at GasBuddy, described diesel at its current price as a "silent killer" for the economy on Tuesday. De Haan also noted that gasoline prices have reached record highs for this time of year.

Earlier this week, the retail price of gasoline for the Labor Day holiday hit a record $4.15 per gallon. The analyst estimates that Americans are now spending approximately $700 million more per day on gasoline and diesel than they were a year ago. "Consumers will definitely feel the pinch at the pump," De Haan added.

Global supply disruptions

The conflict in Iran and the war in Ukraine are disrupting global fuel supplies and pushing prices higher. Ukraine's continued strikes on Russian refineries have forced Moscow to implement a diesel export ban. Meanwhile, Iran and its Houthi allies in Yemen have also attacked refining facilities belonging to US Gulf allies. Iranian attacks on oil tankers have restricted fuel exports through the Strait of Hormuz.

Gary Simmons, Chief Operating Officer at Valero, stated during the US refiner's July 30 earnings call that the conflicts in Eastern Europe and the Middle East have resulted in the shutdown of refineries totaling approximately 5 million barrels per day of capacity.

Andy Lipow, President of Lipow Oil Associates, pointed out in a research note on Wednesday that global diesel supply has contracted by nearly 8%, with almost no spare refining capacity available to fill the gap.

Helima Croft, Global Head of Commodity Strategy at RBC Capital Markets, said during a September 4 program that rising diesel prices present a "tremendous challenge" for the current administration. "US refineries are already running at 98% capacity, leaving virtually no excess capacity to draw upon," Croft noted.