From The Conversation · Jamie Webster · · 3m
Diesel hits record highs as Iran war squeezes supply
The fuel that powers trucking, farming and heating is at all-time prices with no relief in sight.
In brief
The fuel that powers trucking, farming and heating is at all-time prices with no relief in sight. Diesel prices have jumped 78% since the U.S. war with Iran began, driven by lost refining capacity and global supply disruptions that will keep costs high through 2027. Originally reported by The Conversation.
Diesel hits record high
U.S. diesel prices reached $6.28 a gallon on September 14, 2026, breaking all-time records. Prices have jumped 78% since the Iran war began in late February.
“Diesel fuel prices in the U.S. continue to break all-time records, hitting $6.28 a gallon as a national average on Sept. 14, 2026”
Three factors driving the crisis
Environmental regulations on refineries and Russia's Ukraine war created long-term pressure. The U.S. war with Iran closed the Strait of Hormuz for six months, pushing the situation into crisis.
Clean air rules cut refining capacity
Starting in 2006, federal regulations required refiners to produce low-sulfur diesel to reduce air pollution. Compliance cost billions and reduced energy content per gallon.
Refineries closing, not opening
Only one new refinery opened in 50 years. Two shut down in 2025, and more than a dozen converted to renewable diesel, cutting their output by at least half.
Refineries running at maximum
Remaining refineries are operating at nearly 98% capacity, the highest level since 2018. Yet diesel output is still lower than 2025.
Diesel stockpiles at 75-year low
Distillate inventories fell to 103 million barrels by late August, the lowest level for that date since 1951. Exports hit record highs as global markets sought supplies.
“Distillate inventories held by refiners, distributors and retailers fell to about 103 million barrels by late August, the lowest for that point in the calendar since 1951.”
Russia and Middle East cut supplies
Russia banned diesel exports on July 9, 2026 for its military and extended the ban through year-end. Middle Eastern refiners scaled back production due to Iran war disruptions.
Refiners profiting from shortage
Diesel profit margins, called crack spreads, surpassed $100 per barrel for the first time ever in late August. Refinery companies are charging record prices while demand far outpaces supply.
Farmers hit hardest by costs
Higher diesel prices added $1.4 billion to U.S. crop planting costs in 2026, a 63% increase. Illinois, Iowa and Minnesota were hit hardest.
Heating oil crisis looming
Heating oil, chemically similar to diesel, is a key fuel in the Northeast. Inventories are projected to fall below 100 million barrels in September and stay there through 2027. Heating oil prices are already up 30% or more.
No quick fix even if war ends
With refineries at maximum capacity and stockpiles depleted, even a sudden end to the Iran war won't bring significant price relief anytime soon. Any production interruption would worsen the shortage.
“With falling stockpiles, even a sudden end to the Iran war is unlikely to yield significantly lower prices anytime soon.”
The takeaway
Diesel prices have jumped 78% since the U.S. war with Iran began, driven by lost refining capacity and global supply disruptions that will keep costs high through 2027.
