Rising diesel prices a 'hidden tax' on consumers as energy stokes inflation worries

Ines Ferré
·Senior Business Reporter
3 min read
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Diesel prices have risen to their highest levels since March and are showing no immediate signs of easing their upward trend.

The national price of diesel was at $4.38 per gallon as of Monday, $0.41 higher from a month ago, according to data from AAA.

"As we go into the fall agricultural harvest season and the winter heating months, refinery outages can have a significant impact on diesel supplies and put upward pressure on prices, stoking inflation," Andy Lipow of Lipow Oil Associates told Yahoo Finance on Monday.

"The cost of diesel is a hidden tax on all the goods and services the consumer buys as higher prices are passed through."

Part of the upward pressure is due to recent refinery disruptions.

The latest interruption came last week after a fire at Marathon's Garyville, La., refinery caused a partial shutdown of the facility, the fourth largest in the country.

A plume of smoke drifts from the Marathon Petroleum refinery in Garyville, La., toward the Southeast Louisiana War Veterans Home in nearby Reserve, La.,. Friday, Aug. 25, 2023. A massive fire at a south Louisiana oil refinery sent a tower of black smoke billowing into the air above the Mississippi River on Friday, forcing nearby residents to evacuate for several hours as emergency crews battled the blaze. (AP Photo)
A plume of smoke drifts from the Marathon Petroleum refinery in Garyville, La., toward the Southeast Louisiana War Veterans Home in nearby Reserve, La., Friday, Aug. 25, 2023. (AP Photo) (ASSOCIATED PRESS)

"We could still see diesel prices really accelerating into the fall months, which could pose a challenge for retailers that are filling up their inventory ahead of the holidays. We do expect more pain at the pump for diesel," Patrick De Haan, GasBuddy head of petroleum analysis, told Yahoo Finance on Monday.

Gas prices hit a 2023 high earlier this month, renewing concerns that US inflation would reverse its downward trend.

The Personal Consumption Expenditures (PCE) index, the Fed's preferred inflation indicator, which will be released on Thursday morning, is expected to show prices rose 3.3% year-over-year in July, up from 3% in the prior month.

"As far as the PCE I think we probably would not be surprised to see some kind of a raise. After the last report we have seen gas prices and oil prices go up, and that's a big factor," Marketgauge.com chief strategist Michele Schneider told Yahoo Finance Live on Monday.

Oil prices jumped 15% in the month of July.

Tighter output levels from OPEC+ along with voluntary cuts from Saudi Arabia are contributing elevated crude prices. West Texas Intermediate (CL=F) closed fractionally higher at $80.10 per barrel on Monday, while Brent futures (BZ=F) settled at $84.42.

"I think that Saudi Arabia is doing whatever it can to increase the price of Brent crude oil to $90 per barrel, and that will lead to them continuing with their voluntary production cut in October and perhaps beyond," added Lipow.

Lipow also noted that Hurricane Idalia could impact tanker movements, pressuring near-term retail gas prices in the US.

However, seasonality in gasoline demand could keep a lid on prices going into the fall months as hurricane threats wane, GasBuddy's De Haan said.

"Don't be surprised if gas prices do inch up here before Labor Day, but I think it should be a bit of a head fake. Once we get into September, especially mid-September, we should see gas prices easing," he said.

Ines Ferre is a senior business reporter for Yahoo Finance. Follow her on Twitter at @ines_ferre.

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