Diesel at a record, and why the Fed cares

US diesel hit a record $6.53 a gallon on September 22, up about 77% from $3.69 a year ago and roughly a dollar in the last month alone. Crude is climbing too. Brent went from the low $70s in early July to around $100 this month. Regular gasoline is around $4.48, up from $4.10 a month ago.

Most of this is supply. The Iran war that started in February shut the Strait of Hormuz, and traffic there is still well below prewar levels despite the April ceasefire. Ukrainian strikes on Russian refineries have cut fuel exports on top of that. Diesel competes with jet fuel and heating oil for the same refinery capacity, which is why it’s rising faster than gasoline. The EIA expects US distillate stocks to drop below 100 million barrels this month and stay under the five-year low through much of 2027.

For the Fed, diesel matters more than the gas price people see at the pump. It sits underneath shipping, farming, construction and manufacturing, so it shows up in producer prices first and reaches consumer prices a few months later. Central banks usually “look through” an oil shock, but this time inflation was already broad before energy spiked, and the Fed has signaled it won’t ignore it. That is a big part of why markets are pricing another hike in October.

Sources: Chase, NBC News, NPR, The National, Tradingpedia, Fortune.