Record diesel prices stoke food inflation, transportation costs

The record price of diesel threatens to stoke inflation at a time when consumers are already price-sensitive and businesses are reeling from higher costs due to trade tensions.

Why it matters: Diesel is a key cost throughout the supply chain, meaning soaring prices could eventually show up in what consumers pay for everything from groceries to household goods.

Driving the news: The national average price of a gallon of diesel topped $6 for the first time ever, AAA said Friday, Axios' Ben Berkowitz reports.

• That's up 60% from a year earlier.

Between the lines: Food prices could be among the first places consumers feel the ripple effects, executives said this week.

• At grocery chain Kroger, which has been trying to keep a lid on prices: "I would expect that the pressure is actually going to mount," CEO Greg Foran said Friday on an earnings call.
• At pork producer Smithfield Foods: "That impact is beginning to flow through in the second half of the year," CFO Mark Hall said Thursday.
• At Hormel Foods: "With the Iran war and the spike in diesel costs, that's been something we've had to confront," interim CEO Jeffrey Ettinger said Wednesday.

But the effects extend well beyond food.

• For example, at Newell Brands — whose portfolio includes Rubbermaid, Sharpie and Coleman — the inflationary impacts of energy costs have far exceeded the company's initial estimates.
• "It's either resin, which is obviously dependent on the price of oil, or it is direct transportation costs, i.e., diesel," CFO Mark Erceg said Tuesday.

The big picture: Energy prices have spiked since President Trump launched the war with Iran, which prompted the closure of the Strait of Hormuz, a key shipping lane.

• The latest Energy Information Administration outlook expects retail diesel to average $4.40 a gallon in 2027, up 33 cents, or 8.2%, from its previous forecast of $4.07, Axios' Rebecca Falconer and Ben Geman reported.
• The average price of unleaded gasoline has also spiked, rising by $1.11 over the last year to $4.30 per gallon as of Friday, according to AAA.

By the numbers: 47 of the 50 states have experienced an increase in average diesel prices of more than $2 per gallon over the last year, according to GasBuddy analyst Patrick De Haan.

• The economy is facing an extra $300 million in diesel costs every 24 hours.
• California is poised to become the first state with average diesel prices above $8 — with many stations already above $9, according to GasBuddy.

The bottom line: Record diesel prices are turning the energy shock into a broader cost shock for businesses and consumers.