🇺🇸⛽️ Soaring diesel prices rip across US economy

Rising fuel costs threaten new jolt of inflation ahead of November’s midterm elections

A surge in diesel prices is dealing a powerful blow to industrial America, pushing up costs for businesses and consumers across the US ahead of midterm elections.

The pump price of diesel — the lifeblood of the economy because of its essential role in powering industry and agriculture — hit $5.47 a gallon on Tuesday, approaching its all-time high of $5.82 as wars in the Middle East and Europe hobble production and throttle global supplies.

Prices have jumped 8 per cent in the past month while the gap between the cost of diesel and crude oil, known as the “crack spread”, has hit a record high in recent days in a sign of the deepening supply shock.

The price surge has driven up costs for truckers and farmers that are set to ricochet through the broader economy, reigniting inflation and squeezing already thinly stretched American consumers.

Rising fuel prices risk intensifying the political turmoil facing Donald Trump, as voters grow increasingly frustrated ahead of November’s midterm elections to decide control of Congress. A recent FT poll found most voters felt worse off under the president.

The new eruption of fuel inflation is also feeding into a sell-off in US government bonds, sending yields to multiyear highs and pushing up borrowing costs for average Americans.

The conflict has exacerbated existing diesel shortages driven by Ukrainian drone attacks on Russian refineries, which have crimped production by one of the world’s biggest suppliers and caused Moscow to throttle exports.

US refineries have been running at full tilt in an attempt to fill the gap, shipping record volumes of fuel to global markets, which analysts said would be difficult to sustain because of falling inventories.

“There is a huge amount of refining capacity offline in the Middle East and Russia,” said Robert Campbell at Energy Aspects. Combined with lower exports from China, that has left the US as the “supplier of last resort”.

With diesel production near its peak, analysts warned further disruption — from the war, maintenance or hurricane damage — could send prices spiralling.

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