Why higher diesel costs could make groceries and goods more expensive

Consumers are feeling the pinch of higher gasoline prices. But another type of fuel — diesel — also threatens to push up prices at the store in a less visible way, economists said.

Diesel prices have soared 68% since the start of the Iran war, a larger increase than for gasoline prices, according to data from AAA.

That dynamic threatens to push up costs for consumers across store shelves, from food to physical goods, at a time when inflation is already persistently high, economists said.

“It’s going to be another squeeze on the consumer,” said Michael Reid, head of U.S. economics at the Royal Bank of Canada. “And it’s really the lower- and middle-income consumers who feel it disproportionately.”

September marked the first time national average diesel prices ever breached $6 a gallon.

The Group of Seven nations — France, Canada, Germany, Italy, Japan, the United Kingdom and the United States — on Friday agreed to a “substantial release” of diesel stocks to combat rising fuel prices. The Trump administration had been pressuring Europe to release diesel stocks as an alternative to the U.S. imposing an export ban to lower prices.

President Donald Trump signed an executive order Monday temporarily allowing the use of cheaper red-dyed diesel, typically reserved for farm operations, more broadly in an attempt to bring down record-high fuel costs.

The Iran war is the primary cause for the run-up in prices, economists said. The conflict has curbed oil supply flowing through the Middle East, thereby raising prices, and damaged refining infrastructure in the region that turns oil into products like diesel, gasoline and jet fuel.

Russia’s war in Ukraine has also contributed to higher diesel prices, economists said. Kyiv has bombed Russian refineries, leading Moscow to ban diesel exports.