Diesel Hits $6 a Gallon, Squeezing Iowa Farmers and Consumers
Diesel fuel prices have hit a record high of $6 per gallon nationwide, a spike that is hitting Iowa farmers and consumers especially hard. The cost of diesel, which powers the trucks, tractors, and equipment that keep the economy moving, has soared by 60% since the war with Iran began in late February, according to federal data.
Economists warn that the ripple effects will be felt across nearly every sector, from grocery store shelves to farm fields. “The cost of diesel gets into just about everything,” said Diane Swonk, chief economist at KPMG. “From running a farm to the cost of food, but also everything across the economy that's shipped. When diesel prices rise, everything gets that extra fee tacked onto it.”
Swonk predicted the high cost of diesel will remain an “inflationary problem” for months to come, a concern that resonates deeply in Iowa, where agriculture is the backbone of the economy.
Why Are Diesel Prices So High?
Diesel prices have been climbing faster than regular unleaded gasoline since late July, largely because key refineries that produce it have been knocked offline or destroyed. This includes refineries in Eastern Europe, where the Russia-Ukraine war continues, and in the Middle East, where conflict has disrupted supply chains.
Unlike crude oil or gasoline, diesel is uniquely sensitive to disruptions in Russian exports. Russia typically exports more diesel than any other country except the U.S., but Ukrainian drone strikes on Russian refineries have forced the Kremlin to impose a sweeping diesel export ban that will last at least through the end of September.
The blockade of the Strait of Hormuz, a critical shipping lane for global energy, has also contributed to the price surge, affecting all fossil fuels but hitting diesel particularly hard.
Iowa Farmers Feel the Squeeze
For Iowa farmers, the record diesel prices come at a particularly difficult time. Many are already struggling with high fertilizer costs, which are also petroleum-based, and a shortage of supply. Mark Mueller, a fourth-generation Iowa farmer and chair of the Iowa Corn Growers Association, said the combined pressure is pushing him to the brink.
“It'll push me right to the edge,” Mueller said. “If I don't get pushed over the edge by diesel fuel prices, higher fertilizer prices will push me over the edge because a lot of petroleum goes into fertilizer prices, as well.”
Mueller warned that the ongoing conflict is endangering one of America’s strongest economic pillars. “We are endangering one of the strongest economic pillars that we have in this country through economic uncertainty, higher prices,” he said. “We're shooting ourselves in the foot, and we don't have to.”
Consumers Will Pay More for Everything
The impact of $6-per-gallon diesel will be felt far beyond the farm. Groceries are especially vulnerable, as supermarkets operate on thin margins and rely heavily on diesel-powered transportation. Joseph Brusuelas, chief economist at RSM, warned that “consumers should be prepared to pay higher inflation for anything that requires being shipped.”
Brusuelas noted that grocery prices will reflect the rising cost of diesel across the entire food supply chain, starting with farmers and extending to processing, packaging, and delivery.
Political Fallout and No Relief in Sight
The economic pain is fueling political discontent. As Republicans gathered in Dallas for what President Donald Trump dubbed a midterm election convention, a new NBC News poll found that around 70% of voters disapprove of his handling of the Iran war. Mueller, who is frustrated with the situation, said, “I just see economic carnage the longer this war goes on.”
Trump has repeatedly insisted the Iran war would be short, but this week he conceded that high gas prices are unlikely to fall soon. “I think it's going to take a little bit longer than the midterms for the cost of gas to fall again,” he told reporters. “Right after the election, oil prices are going to be tumbling downward.”
Over the past month, the price of U.S. crude oil has risen by more than 25%. Diesel, meanwhile, has been on an upward trajectory since 2022, when Russia invaded Ukraine. In June of that year, the average price of diesel set a record at $5.82 per gallon. While prices fell somewhat in the ensuing years, they never returned to pre-2022 levels.
The latest jump in diesel prices is once again tied to the Russia-Ukraine war, more than four years after it kicked off diesel’s initial march higher. For Iowa farmers and consumers alike, the question now is how long the pain will last.
What Can Iowa Consumers Expect?
For now, economists see no immediate relief. Diesel prices are expected to remain elevated as long as global conflicts disrupt supply chains. Iowa families should prepare for higher costs at the grocery store and for any goods that require shipping. Farmers, already facing tight margins, may need to make difficult decisions about planting and harvesting.
As Mueller put it, the situation is a stark reminder of how global events can hit home. “We're endangering one of the strongest economic pillars that we have in this country,” he said. “And we don't have to.”