Diesel prices are surging at the worst possible time for farmers preparing for fall harvest. The national average retail price for diesel hit $5.61 per gallon on August 28, up nearly $2.00 from last year and closing in on the all-time high of $5.82 set in June 2022.
The spike comes as diesel inventories have dropped to their lowest levels since 1982, creating a perfect storm of supply constraints and geopolitical tensions.
Multiple Factors Driving Price Surge
EIA data shows distillate fuel oil stocks, which include diesel and heating oil, at only 103.4 million barrels for the week ending August 21. That’s a record low for this time of year.
The situation has worsened in recent weeks as Ukraine has severely damaged Russian oil refineries, disrupting global diesel supplies.
“Diesel prices have again surged in the last few weeks as Ukraine has increased its attacks on Russian oil refineries,” says Patrick De Haan, executive director of GasBuddy. “That’s very problematic. Russia’s one of the largest producers of diesel to the global market. One in nine barrels of diesel produced globally comes from Russia. And now they’ve banned exports of diesel. So suddenly the global market for diesel is extremely tight.”
The crisis is compounded by the earlier closure of the Strait of Hormuz, which pushed the Strategic Petroleum Reserve to critically low levels.
Worst Timing for Agriculture
The price surge couldn’t come at a worse time for farmers.
“Not like there’s any good time for diesel prices to go up, but potentially the worst time with farmers now looking forward to harvesting their crops in the next month or so,” De Haan says. “Diesel prices again just an arm’s reach away from record-setting territory and that could happen.”
Depending on the size of operation, the elevated diesel prices could add thousands of dollars to harvest costs.
No Relief in Sight
Russia is attempting to quickly repair damaged refineries, but De Haan says the damage is significant.
“Just not enough diesel supply right now and much of that is because of the Ukraine attacks that have knocked offline Russia’s top refineries,” he says.
De Haan can’t speculate on when farmers will see relief, especially since diesel prices typically track with heating oil prices.
“Traditionally, diesel prices do continue tending to rise throughout the fall as many Americans in rural areas start to fill their home heating oil tanks for the winter,” he explains. “And if it’s a cold winter, and if Ukraine continues to attack Russian refineries, it could be a record-setting winter.”
The national average price for diesel jumped nearly 20 cents last week alone.
Prices Could Climb Even Higher
De Haan isn’t ruling out even higher prices in the months ahead.
“Right now, we are well above the $5 range. So until there is enough global refining capacity, we probably will continue to see diesel prices rather elevated for at least the next few months,” he says.
In a worst-case scenario, prices could climb even higher.
“If we continue to see new attacks going into the winter, it’s certainly possible that we could see diesel prices climbing even closer to $6 a gallon across the country,” De Haan warns.
Broader Economic Impact
The diesel crisis extends beyond the farm gate. Higher diesel costs will likely ripple through the entire economy.
“With Americans, what they buy at the grocery store, diesel, whether it’s trucks, trains, or tractors, the U.S. economy is powered by diesel,” De Haan said. “And so, this is going to likely reignite inflation in the months ahead.”
Fertilizer prices could also face upward pressure from the diesel shortage.
While farmers typically buy diesel in bulk rather than at retail pumps, the market dynamics affecting retail prices impact bulk pricing as well, leaving producers with few options to avoid the financial hit during this critical harvest season.
