California diesel prices hit $7 per gallon as global refinery disruptions, Middle East tensions and supply shortages drive fuel costs higher.
Diesel prices in California have climbed back to about $7 per gallon, driven by refinery disruptions linked to the wars in Eastern Europe and the Middle East and tightening global fuel supplies.
According to AAA data, truckers in the state are now paying about 30 cents more per gallon than they did a month ago. Prices have risen by roughly 37%, or $1.89 per gallon, from the same period last year.
California diesel prices reached a record $7.75 per gallon in April after disruptions to tanker traffic through the Strait of Hormuz. Prices subsequently fell below $6.50 per gallon in July as exports through the strategic waterway recovered following a memorandum of understanding between Washington and Tehran.
The latest increase comes as farmers prepare for the harvest and freight activity typically accelerates ahead of the holiday shopping season.
Across the United States, diesel averaged $5.50 per gallon on Wednesday, up about 40 cents over the past month and $1.81 higher than the same period in 2025.
Rising diesel costs are expected to feed into higher prices for groceries and other consumer goods.
“That’s a pretty significant inflationary concern,” Kevin Book, managing director at ClearView Energy Partners, told CNBC’s “Squawk Box” on Monday.
Bob McNally, president of Rapidan Energy, described diesel as the most important fuel for the global economy because of its widespread use in transportation, heating, agriculture and industrial activities.
“It is the important macro fuel to watch,” McNally told CNBC’s “Squawk on the Street” on Monday.
Meanwhile, refiners are benefiting from the surge in diesel margins. The margin for converting crude oil into diesel has risen to about $100 per barrel, exceeding the roughly $85 price of US crude oil.
Andy Lipow, president of Lipow Oil Associates, said diesel prices are particularly high in California because the state relies more heavily on expensive crude oil imports and requires a specialised diesel formulation.
Environmental regulations, along with state excise and sales taxes, also contribute to higher fuel prices in California, he said.
Global diesel supplies have been squeezed by disruptions linked to the wars in Ukraine and Iran, with about 8% of the supply needed to meet global demand of roughly 28 million barrels per day affected, according to Lipow.
Ukrainian drone attacks on Russian refineries have forced Moscow to restrict diesel exports of about 800,000 barrels per day, Lipow said.
Disruptions around the Strait of Hormuz have also affected about 1.2 million barrels per day of Middle Eastern diesel exports.
In addition, Iran’s Houthi allies in Yemen recently attacked a Saudi Arabian refinery in Jizan, shutting the facility and taking about 200,000 barrels per day of refining capacity offline at least until the end of August, according to Lipow.
China is also processing less crude oil and exporting less fuel, further tightening global supplies.
Dan Yergin, vice chairman of S&P Global, said about six million barrels per day of global refining capacity is currently offline.
“That’s affecting the whole economy,” Yergin said in an interview with CNBC on July 31.
Book said diesel prices are unlikely to ease significantly until damaged refineries in Russia return to operation and Middle Eastern fuel exports increase.
However, sanctions could make it difficult for Russia to obtain the materials needed to repair its refineries, potentially extending the disruptions.
“That prolongs outages,” Book said.
