Oil touches $97 per barrel as diesel prices surge to highest level this year

The price of crude oil rose for a fourth straight trading session on Thursday, part of a monthlong run that has helped push the average cost of diesel fuel to its highest level since 2022.

At $5.78 per gallon on Thursday morning, the cost of diesel is up more than 53% since the war with Iran started in late February. At the time, diesel averaged $3.76 per gallon nationwide.

The price of unleaded gasoline, which most personal vehicles run on, rose alongside diesel Thursday. According to AAA data tracked by NBC News, the national average was $4.14 per gallon, up two cents from Wednesday.

The moves higher in retail fuel prices come as crude oil prices keep climbing. After surpassing $97 per barrel Thursday morning, international oil benchmark Brent was now up almost 10% since the beginning of the week.

But experts are especially focused this week on diesel, the fuel powers everything from boats and trains to farm equipment and 18-wheelers. Around the world, the planting and harvesting of crops are dependent on diesel-powered machines. As a result, higher diesel prices now could mean higher grocery prices later this fall.

Several different factors are fueling the global rise in energy prices. Chief among them is the ongoing war in Iran, which analysts view as a stalemate that has choked major maritime arteries for oil and gas.

Recent attacks on ships in the critical Strait of Hormuz, coupled with retaliatory U.S. strikes on Iranian targets, mean that daily vessel traffic in the waterway remains minimal.

Before the war, the strait was a critical passageway through which about 20% of the world’s oil supply passed to reach ports around the globe.

Also putting pressure on gas prices this week is the recent escalation of the Ukraine war.

“Following Ukrainian drone attacks on refineries, Russia has banned diesel exports until the end of September amid domestic supply concerns,” wrote ING commodities analysts. “This matters because Russia is the world’s second-largest diesel exporter. Combined disruptions are equivalent to around 20% of global seaborne diesel trade.”

Only two developments could realistically be expected to bring meaningful relief to oil and gas prices, they wrote. One is a higher flow of oil and gas through the Persian Gulf, and the other is a resumption of Russian exports.

On Wednesday, President Donald Trump said the latest round of U.S. strikes on Iran would not last “too long,” but he added, “We’re prepared to do another one any time we want.”

He also said U.S. forces were “bringing lots of boats out” of the Strait of Hormuz each day.

The president’s upbeat comments did little to ease oil price pressures, however.

Last week, Goldman Sachs Research estimated that Persian Gulf oil exports have recovered to about two-thirds of pre-war levels. On Thursday, ING estimated it was about 50%.

But those figures, likewise, brought little comfort to energy markets. Wholesale gas prices were up 1% in early Thursday trading, as was natural gas.

One of the many knock-on effects of the energy price shock has been a broad expectation among investors that inflation will stay elevated. This in turn has driven up U.S. Treasury yields, which are sensitive to inflation projections.

After climbing all week, bond yields finally dipped slightly on Thursday as markets weighed the odds of an interest rate hike later this month. That small drop is unlikely to bring any relief to consumers, however. The average 30-year fixed mortgage rate hit 6.91% late Wednesday.

Still, despite the rising energy prices and protracted wars, Federal Reserve governor Christoper Waller said Thursday that he expects consumer and wholesale inflation readings in the weeks ahead to be “reasonable,” which in Fed-speak means not-too-high.

From Waller’s viewpoint, “So far energy [prices have] not bled into other goods and prices.”

That said, if inflation data for August “Comes in hot, I would consider a rate hike,” he said at an event hosted by the Reuters news agency.

”I’m going to paraphrase John Lennon here,” said Waller. “Give disinflation a chance.”