Diesel prices soared to a new record in California over Labor Day weekend, mirroring a national trend as the U.S. war with Iran causes major refinery disruptions and the price of crude oil soars.
The average price of diesel across the state hit $7.81 per gallon on Sunday — roughly 50 cents more than the average price a week ago and more than $2.60 higher compared to this time last year, according to AAA Gas Prices.
The national average price of diesel also jumped to an all-time high of $5.85 on Friday, an increase that experts said was driven by constraints on global refining capacity.
Refineries in Russia and the Persian Gulf have been damaged in the ongoing wars in those regions, according to Paasha Mahdavi, a U.C. Santa Barabara political science professor. The war has also significantly hampered the export of the main ingredients for making diesel from crude oil, he said by email.
Prior to this weekend, the record for diesel prices in California was $7.75 per gallon, set in April.
Severin Borenstein, an economist at U.C. Berkeley, noted by email that the Strait of Hormuz closure has also disrupted shipments of refined products from large refineries in Saudi Arabia and other parts of the Middle East.
Diesel prices in the near future are difficult to predict, he said, because “it will largely be driven by what happens with those two wars.”
“Futures markets’ best guess is that six months or a year out, prices will be substantially lower, but even traders in those markets would tell you that is just a guess,” Borenstein said.
Mahdavi predicted that diesel prices could top $8 per gallon in California before the end of the month, as the price tends to peak seasonally in September and October due to the fall harvest.
Diesel prices in San Francisco and Oakland have already climbed past that benchmark, with record-setting average prices of $8.23 and $8.02, respectively, according to AAA.
The average price of regular gasoline in California has also climbed to $5.84 per gallon, up from $4.61 a year ago. Still, it remains below the average record high, which was set in June 2022 at $6.44.
Gas prices have not climbed as much as diesel because the supply chain for additives has been less impacted by the war, Mahdavi said.
California fuel prices are generally higher than the rest of the nation due to the state’s relative energy isolation: It lacks pipelines carrying fuel in from other states and is therefore more dependent on imports brought by ship. Environmental requirements are another factor that raises the price.
“The California ‘premium’ over the rest of the US for diesel was averaging $1.14/gallon before the war, and it’s now averaging $1.58/gallon, so the rising trajectory in diesel prices is getting steeper for Californians than other Americans,” said Mahdavi, who said that refineries in California face less competition than those elsewhere in the nation.