White House Has Few Options Left as Diesel Prices Surge Toward $7

Diesel prices continued their strong surge this week, and this trend may persist, with the White House having few options left ahead of the midterm elections.

Diesel Prices Are in a Strong Surge

Data compiled by AAA shows that the average price of diesel has jumped to $6.51, a few weeks after it crossed the $6 milestone. It was trading at $5.6 a month ago and $3.68 in the same period last year. 

Some states are paying higher than that. In California, the average diesel price has jumped to $8.427, while Hawaii and Washington have moved to $7.18 and $7.4, respectively. 

Diesel prices are soaring because of the ongoing US-Iran war that has led to a big drop in the number of tankers transiting through the Strait of Hormuz. This crisis has escalated because of the ongoing crisis between the Houthis and Saudi Arabia.

Most notably, Ukraine has continued striking oil refineries in Russia, one of the top diesel exporters in the world. Russia has continued banning diesel exports to ensure local supplies.

There is a risk that all these crises will continue in the near term. Russia and Ukraine are still fighting, while Saudi Arabia and the Houthis are not nearing an agreement. Most notably, President Donald Trump has suggested that he will go back to bombing Iran after the election. He also threatened to annihilate the country.

White House Has Limited Options

The reality is that White House has limited options to lower diesel prices. In a statement this week, Trump will support banning diesel exports, a move he hopes will lower prices. However, analysts and lobbying groups have warned that such a ban will lead to higher prices in the US.

The US is the biggest diesel exporter in the world. As such, banning its supply would lead to higher international prices, which would also affect trends in the US. 

Trump is also considering suspending taxes on diesel. Such a move would have a minimal impact since the federal excise tax rate is just $0.24. He is also considering removing restrictions on the sale of the dyed red variety of diesel that is usually restricted to off-road use. 

Diesel will retreat once crude oil and transportation prices continue falling. This will only happen when the three wars: US-Iran, Saudi Arabia-Houthi, and Russia-Ukraine end. Even when this ends, the process of repairing the damaged refineries may take longer.

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