Executive Summary

• U.S. retail diesel prices hit an all-time high of $5.85 per gallon on September 4, 2026; concurrently, the U.S. Gulf Coast diesel crack spread (a measure of profit margins) surged past $100 per barrel on September 1, 2026—a fivefold jump from the pre-Middle-East-conflict baseline of approximately $20 per barrel.
• The diesel price shock is driven by several factors: the six-month de facto closure of the Strait of Hormuz, Russia’s diesel export ban, U.S. refinery utilization maxing out at 98 percent, yield competition from high-margin jet fuel, and the short-run demand inelasticity of commercial freight and agriculture.
• The average pump price increase of approximately $1.61 per gallon since the start of the U.S.-Iran conflicts added roughly $34.8 billion in direct diesel fuel costs for commercial transport from late February-August 2026, cascading through supply chains to U.S. consumers via higher freight charges and elevated goods prices; this added cost will grow in the days ahead if the pump price of diesel fuel reaches $6 per gallon, as some analysts predict.

Introduction

U.S. retail diesel prices hit an all-time high of $5.85 per gallon on September 4, 2026, surpassing the previous June 2022 record of $5.78 per gallon, as of the publication of this insight. Concurrently, the U.S. Gulf Coast diesel crack spread (the price difference between diesel and crude oil) surged past $100 per barrel on September 1, 2026. This is a fivefold jump from its pre-conflict baseline of approximately $20 per barrel, which signals high product scarcity and an unprecedented refining premium.

The diesel price shock is driven by a confluence of factors: the six-month de facto closure of the Strait of Hormuz, Russia’s diesel export ban, U.S. refinery operable utilization maxing out at 98 percent, yield competition from high-margin jet fuel, and the short-run demand inelasticity of commercial freight and agriculture.

As the domestic transportation sector consumes roughly 120 million gallons of diesel daily without immediate fuel substitutes, every $1.00-per-gallon increase in retail diesel imposes an estimated $120 million per day in direct economic surcharges. The average pump price increase of approximately $1.61 per gallon since the start of the U.S.-Iran conflicts added roughly $34.8 billion in direct diesel fuel costs for commercial transport from late February-August 2026, cascading through supply chains to U.S. consumers via higher freight charges and elevated goods prices. This added cost will grow in the days ahead if the pump price of diesel fuel reaches $6 per gallon, as some analysts predict.

Surging U.S. Diesel Prices and Crack Spreads

As shown in Figure 1, U.S. average weekly diesel retail prices reached a record high at $5.64 per gallon the week of August 24, 2026, and $5.57 per gallon the following week. On September 4, 2026, the price reached $5.85 per gallon, the highest on record, as of the publication of this insight. The last major U.S. diesel price spikes occurred during the 2022 onset of the Ukraine-Russian war, when prices hit $5.78 per gallon in the week of June 20, 2022.

Source: U.S. Energy Information Administration, The Wall Street Journal.

A crack spread refers to the price difference between a refined petroleum product and the equivalent amount of crude oil. As shown in Figure 2, the U.S. diesel crack spread (the difference between the Gulf Coast diesel spot price and that of Brent crude) has risen sharply in 2026, reaching over $100 per barrel on September 1, 2026. This is a huge jump from the pre-Middle-East conflict diesel crack spread of $20 a barrel, which means that it is highly attractive for U.S refiners to produce diesel products from crude oil.

Source: U.S. Energy Information Administration, Author’s calculation.

Factors that are Driving the High Prices

Several major factors are driving historic high U.S. diesel prices and crack spread:

Middle East Conflicts

The Middle East conflicts triggered by the U.S.-Israel Attack on Iran earlier this year have led to the de facto closure of the Strait of Hormuz for more than six months. This has cut off as much as 20 percent of the global supply of crude oil and petroleum products. American Action Forum’s (AAF) previous insight provides a detailed analysis of the global supply shock. As of September 9, 2026, Brent crude oil prices again surged past $100 a barrel, the highest level since July. The current spike in crude prices was prompted by a new round of strikes by both the United States and Iran.

Besides the Strait of Hormuz, other maritime chokepoints have contributed to global disruption. They include Bab al-Mandeb Strait, which controls access to Red Sea ports (threatened by attacks by Yemen’s Houthi militants) and Russia’s Black Sea shipping disruption (due to Russia’s ongoing conflict with Ukraine).

Russian Diesel Export Ban

Russia implemented a diesel-export ban in July of this year, and extended the ban to September 30 (as of the publication date of this insight). This ban has added tremendous pressure to the already tight global petroleum market, as Russia was a major exporter of diesel – accounting for about 10 percent of global seaborne-traded diesel supplies. The ban was prompted by Ukraine’s more than 70 drone attacks on Russian refinery facilities since the start of 2026. S&P Global estimated that about half of Russia’s refining capacity was offline by the end of August.

According to the Center on Global Energy Policy’s analysis of data from Kpler’s (a leading database on global maritime trade), Russian middle-distillate exports (mostly diesel)—which exceeded 800,000 barrels per day (b/d) in 2025—dropped to roughly 350,000 b/d in June (a 60-percent year-over-year decline) before collapsing to 50,000 b/d by late July.

While post-2022 sanctions primarily rerouted Russian crude and refined products from Europe to countries such as Türkiye and Brazil, the export ban has physically removed a substantial volume of diesel from the fungible world market, driving up diesel prices globally.

U.S. Refiners’ High Utilization Rate and Competition from Jet Fuel

The Middle East conflicts and Russian export ban have pushed global buyers of diesel to U.S. supplies, as U.S. exporters chase higher profits from foreign customers. However, U.S. refineries’ capacity utilization has reached an extraordinary level of 98 percent by the last week of August 2026, compared to 94.6 percent in the same week in 2025. This means that U.S. refiners do not have any additional capacity to produce diesel fuel to meet demand.

At the same time, the high crack spread of jet fuel is competing with diesel products at refineries, as both derive from middle distillates. Refiners can modify processes and temperatures to yield more marginal barrels of jet fuel or diesel. AAF’s previous insight provided details on how U.S. refiners have adjusted refining processes to maximize jet fuel production to capture high margins.

Industrial and Agricultural Inelasticity

Diesel is an important fuel for the U.S. economy, widely used in trucks and trains to transport products. Diesel accounts for about 22 percent of total U.S. energy consumption in the transportation sector on an energy content basis. Diesel fuel is also used in most farm and construction equipment.

Diesel consumption, especially in the farming and industrial sectors, is highly inelastic – insensitive to price shocks in the short run. This is due to a lack of substitute fuels for farming activities (planting, cultivating, harvesting, etc.) and long-distance transportation of goods. Diesel fuel prices are typically pushed to higher levels in winter as heating oil demand puts pressure on the diesel fuel market.

Increased Costs for U.S. Consumers

Total U.S. supply of distillate fuel oil averaged 3.8 million barrels per day in January-August 2026—or roughly 159 million gallons daily. Because on-highway diesel accounts for about 75 percent of total U.S. distillate consumption, daily diesel consumption is about 120 million gallons. This represents roughly $120 million per day in extra costs for every one-dollar-per-gallon increase in U.S. retail diesel prices.

The average pump price increase of approximately $1.61 per gallon since the start of the U.S.-Iran conflicts added roughly $34.8 billion in direct diesel fuel costs for commercial transport from late February-August 2026, cascading through supply chains to U.S. consumers via higher freight charges and elevated goods prices. This added cost will grow in the days ahead if the pump price of diesel fuel reaches $6 per gallon, as some analysts predict.