Executive Brief: Whats Really Driving Diesel Prices

Overview

U.S. diesel is trading near record highs even though the crude oil it is made from costs less than it did in April. AAA’s national average was $6.48 a gallon on Sept. 26, just below the record $6.53 set Sept. 22, up from $5.62 a month ago and $3.68 a year ago. [1] The driver is not the oil in the ground. It is the shrinking world capacity to turn that oil into diesel. [2, 3, 6]

Where the Money Goes

Using the Energy Information Administration’s (EIA) prices for Sept. 22, a gallon of diesel at $6.53 breaks down. [2, 3, 4, 5]

Of the $6.53 you pay for a gallon of diesel, roughly:

$2.74 is the crude oil itself. A barrel holds 42 gallons, so Brent at $114.89 a barrel works out to $2.74 a gallon. That’s about 62% more than in February, before the war.
$2.27 is the refining gap, the cost of turning that crude into diesel. It’s the difference between wholesale diesel in New York Harbor ($5.01 a gallon) and the crude inside it. In February it was 81 cents. It has nearly tripled.
About $1.52 is taxes, distribution and retail.

Since February, retail diesel is up $2.81 a gallon. Crude explains about 37% of that increase. The wider refining gap explains about 52%. [2, 3, 4, 5] Between April and August, crude actually fell 62 cents a gallon, and pump prices barely moved because the refining gap widened by 88 cents and absorbed the whole drop. [3, 4, 5]

Why Refining Is the Bottleneck

Lost exports from the Gulf and Russia: The International Energy Agency (IEA) says combined Gulf and Russian diesel exports in August were 1.6 million barrels a day below February levels. [6]
Russia’s refinery war: Ukrainian drone strikes had forced three of Russia’s six largest diesel refineries to cut or halt output by mid-September, according to Reuters calculations. [9] Moscow has also banned diesel and gasoline exports, with the ban extended into 2027. [10]
Fewer barrels processed worldwide: Global refinery runs were 4.2 million barrels a day lower in August than a year earlier. [6]
Thin U.S. inventories: Record American crude output has not translated into diesel supply. U.S. distillate stocks stood at 107.4 million barrels in mid-September, against 123.0 million a year earlier, as refiners send more product abroad. [7, 8]

Impact on Freight, Farms and Food

Freight: Trucks carried about 72.7% of U.S. freight by weight in 2024. The refining gap therefore flows into the cost of moving nearly everything. [11]
Farms: Farm diesel cost $5.45 a gallon on Sept. 4, up from $3.02 a year earlier. The American Farm Bureau Federation, citing USDA, puts this year’s farm fuel and oil bill at about $22 billion, up nearly 29%. [12] It is the same fuel-cost pressure behind rising food prices described in our brief on the agricultural labour shortage.
Regions: On Sept. 25, state averages ranged from $5.92 in Texas to $8.44 in California. [13]

Outlook

The EIA’s September outlook forecasts retail diesel averaging $5.07 a gallon for 2026 and $4.40 in 2027. [7] Those forecasts were finished Sept. 3, before drone attacks shut Saudi Arabia’s East-West Pipeline, which restarted at a low rate on Sept. 22. [14] Treat them as a floor, not a promise.

The takeaway for anyone budgeting for fuel: falling crude prices alone will not bring diesel down. Relief depends on refining capacity and export flows coming back, in the Gulf and in Russia. Neither is on a firm timetable. Until then, expect freight and food costs to keep carrying the refining premium. [6, 7]

What to watch: EIA’s weekly retail diesel price (next release Sept. 29), weekly U.S. distillate inventories, the IEA’s October Oil Market Report, and Russia’s decision on its export ban.

For the full analysis, including the data tables, the Saudi and Russian supply disruptions, and our methodology, read Diesel’s Record Run: Why Refining, Not Crude, Sets the Price.