Business
As the Iran War Continues, Diesel Prices Hit All-Time High
Diesel surpassed $6 per gallon for the first time in U.S. history earlier this month, according to data from the American Automobile Association.
Today, diesel sits at $6.51 per gallon, an all-time high. A year ago, it was $3.69. The cost of diesel rose 42 cents last week alone. The recent rise in diesel prices represents the largest fluctuation since Russia invaded Ukraine in 2022, shocking global oil markets.
Mark Witte, an economics professor at Northwestern University, and Matt Wells, vice president of the Mid-West Truckers Association, joined “Chicago Tonight” to break down what’s driving the increase and how it’s impacting businesses and consumers.
WTTW News: What’s behind the increase in diesel prices?
Mark Witte: The joke is we always say supply and demand. But yes, it’s certainly supply. We’ve seen this disruption in the supply of crude oil coming out of the Middle East, and that’s the basic input into diesel. We also have some difficulties on the refining level, in that there’s a crunch. We sort of work on supply networks that are smoothly able to take oil from where we expect it to come from. But now that’s been disrupted, and so the refineries that are most — we just don’t know the right refinery network, given where oil is coming from. So that’s also creating some shortages and driving up prices.
What’s your reaction to watching diesel prices soar?
Matt Wells: It’s definitely difficult for the industry right now. We operate on a very small margin by mile, and whenever diesel fuel takes up 40% of your cost of operating your vehicle, and you see those prices increase to the levels we’ve seen today, it’s definitely making it more difficult for the transportation industry to move things. And it’s definitely gonna cost a lot more money. We’re not making any more money on this. This is definitely something that’s costing our industry, and we have to pass those costs onto consumers at the end of the day.
Last week, the price of diesel jumped 42 cents. How drastic of a jump is that?
Witte: In percentage terms, it’s pretty big. … If you’re gonna make a bunch of stuff, you’re planning way ahead on how to get it to market, and so you sign these long-term contracts. But you can’t guarantee a price because you don’t know what fuel is gonna cost. So you work in there that if fuel gets expensive, then the price is gonna go up because, not that you’re gonna make any more profit, but to survive, you need to pass it along. And so that works into the cost of avocados and snow tires and everything else.
President Donald Trump has sought to cast blame on energy facilities hit as part of the Russia-Ukraine war for the increase. He wrote on Truth Social last week, ‘The World’s Diesel price rise is mostly caused by the Russia/Ukraine War, not Iran.’ What’s your reaction to that statement?
Witte: Certainly, Russia is a big producer of diesel fuel. They’re a big producer of oil, and they refine a lot of diesel, and they use a lot of diesel. They sell it in Europe. Ukraine is making life tough for Russia with their energy sector. That’s not a zero contribution, but the big thing is just the cost of oil is up insanely. We’ve all seen that. We see it in gasoline, just for the cost of a barrel. And that’s the big source of this (diesel) cost drive.
Is there any relief you would like to see for truck drivers, whether from the Trump administration or the state of Illinois?
Wells: The state of Illinois has some of the highest fuel taxes in the nation. We have a road fund that is very, very well funded. The state has the ability, and our governor has the ability, to put more than just a pause on an increase, but to actually slow down the motor fuel tax for a while to help relieve a little bit of that pressure we’re seeing — I think without that much of a detriment to the state of Illinois. Our legislature has the ability to do so, and we’d like to see them step up and make some changes, not only to help our industry but everyone in the state of Illinois. Again, this is the fundamental price of everything. Everything you buy shows up on a truck.
The rise in diesel prices comes just after the Illinois Tollway Board approved a 30% commercial vehicle toll increase. That increase goes into effect in January. What are the effects of record-high diesel costs combining with a toll increase?
Wells: You’re looking at just more cost to deliver goods to the people of Chicago and the Chicagoland area that wasn’t there a few months ago. You continue to compound these things, and people are gonna eventually say, ‘I’ve had enough.’
When could we see prices come down?
Witte: At a certain level. Prices were almost this high when Russia invaded Ukraine. There was a big brief spike, and that came down fairly quickly. This one seems to be much more persistent. I think that people for a long time to come are gonna be quite concerned about whether oil will continue to flow through the various straits. That sort of puts a risk premium on everything. There will be a higher price because we don’t know when suddenly the tap will get turned off.
