Diesel Prices Hit a Record $6.45 a Gallon, Raising Inflation Risk for Consumers
The average U.S. diesel price hit an all-time high of $6.45 a gallon on Friday, according to MarketWatch, which cited AAA data. Regular gasoline climbed to a national average of $4.47 a gallon the same day, up about 40 cents from a month earlier.
Nearly every truck and train in the country runs on diesel, and that's hard to escape. Sam Stovall, chief investment strategist at CFRA Research, said companies will keep passing higher fuel costs on to shoppers.
Higher diesel prices are a very big concern, he said, adding that despite talk of an AI-driven economy, nobody has yet figured out how to teleport an Amazon package.
Why Diesel Weighs Heavier Than Gasoline
Freight haulers, railroads and truckers absorb diesel costs first, then build them into shipping rates. Those costs don't disappear. They surface later in the price of groceries, appliances and anything moved by truck.
Stovall pointed to that chain as the reason diesel could keep pushing inflation higher this year.
Oil Near $100 a Barrel, Six Weeks From the Midterms
Crude oil topped $100 a barrel this week, and the war in Iran has raised concern that prices could climb further as the country heads toward midterm elections in November.
Jeff Schulze, head investment strategist at Franklin Templeton Institute, called oil's trajectory the unanswerable question. Voters go to the polls in six weeks.
Schulze said a jump to $140 a barrel cannot be entirely ruled out, alongside a more aggressive round of Federal Reserve rate hikes than markets currently expect. He labeled that scenario a tail risk.
The more probable path, he said, is that the approaching midterms push President Donald Trump toward an offramp from the conflict.
Transportation Stocks Already in a Correction
The Dow Jones Transportation Average tracks 20 airline, railroad and trucking stocks. It closed Friday 16.1% below its April record high of 23,933.14, according to Dow Jones Market Data. That's a correction, a drop of at least 10% from its peak.
Jose Rasco, chief investment officer Americas at HSBC Private Bank and Premier Wealth, said refining bottlenecks and widening global energy chokepoints beyond the Strait of Hormuz have prompted a Senate Republican to float a ban on diesel exports.
Higher fuel, inflation and borrowing costs are already pushing lower- and middle-income consumers toward cheaper substitutes, Rasco said, trading steak for hamburger. He does not expect that shift to tip the economy into a full recession.
The Fed's Balancing Act
The Federal Reserve, under new Chairman Kevin Warsh, raised interest rates on Wednesday for the first time in three years. It signaled more increases are likely, a move detailed in networth.com's recent coverage.
Rasco expects one more hike this year, lifting the Fed's short-term policy rate to a range of 4% to 4.25%, before holding it there through 2027.
The bond selloff has already pushed the 10-year Treasury yield to about 5%. Rasco said that level can hurt stocks. Warsh's own language has pointed toward further tightening, a shift examined in networth.com's separate analysis.