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Diesel prices have been higher than regular gasoline prices since 2004. In April 2025, diesel prices rose to $3.592, up 3 cents from the previous week. This week, prices rose again, reaching $3.598. The rise in diesel prices is due to several factors, including the transition to less polluting fuels, federal excise tax, and the recent conflict between Israel and Iran, which has pushed up the cost of oil. With the anticipation of a limited conflict and the impact of rising oil prices, diesel prices are expected to continue rising.
| Characteristics | Values |
|---|---|
| Diesel prices | $3.592-3.598 |
| Gasoline prices | $3.162-$3.168 |
| Reason for price hike | Intensifying conflict between Israel and Iran |
| Global crude oil price | $71.70-$75 per barrel |
| US crude oil price | $73.42 per barrel |
| UK petrol price | 132.1p per litre |
| US gasoline demand | High during the summer motoring season |
| Diesel price in Rocky Mountain region | $3.472 |
| Diesel price on the West Coast | $4.259 |
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What You'll Learn
The conflict between Israel and Iran
Diesel prices are going up, and it is likely that they will continue to rise. This can be attributed to the ongoing conflict between Israel and Iran, which has pushed up the cost of oil worldwide.
The Israel-Iran Conflict
Proxy Conflicts and Covert Operations
Iran and Israel have a history of supporting opposing groups in the region. Iran has backed Lebanese Shia militias, such as Hezbollah, and Palestinian groups such as Hamas. Israel, on the other hand, has supported Iranian rebels, such as the People's Mujahedin of Iran, and conducted airstrikes against Iranian allies in Syria. In 2018, Israeli forces directly attacked Iranian forces in Syria.
Rising Tensions
The election of Iranian hardliner Mahmoud Ahmadinejad in 2005 further strained relations. During the 2006 Lebanon War, Iranian Revolutionary Guards are believed to have assisted Hezbollah in their attacks on Israel. Iran has also been accused of assisting Hamas in planning the 2023 Gaza War, which resulted in Israeli retaliatory strikes and a formal declaration of war on Hamas.
Regional Hegemony and Sectarianism
The Iran-Saudi Arabia proxy conflict, waged since 1979, has drawn comparisons to the Cold War era. The rivalry is a political and economic struggle, exacerbated by religious differences. Both countries exploit sectarianism in the region for geopolitical purposes. Israel and Saudi Arabia do not have official diplomatic relations but are believed to cooperate behind the scenes, further complicating the dynamics of the region.
As the conflict between Israel and Iran intensifies, it remains to be seen whether diplomatic solutions can be reached. The impact of the conflict on global oil prices and, subsequently, diesel prices, underscores the interconnected nature of the global economy and the far-reaching consequences of regional conflicts.
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Crude oil prices
In June 2025, the conflict between Israel and Iran caused oil prices to climb as traders worried about potential disruptions to supply chains. Iran is a significant oil producer, contributing about 3% of global supplies. As the conflict intensified, Brent crude oil prices rose by 0.5% in early trading, pushing towards $75 per barrel, while US crude oil prices increased by 0.7% to $73.42. However, prices dropped as reports surfaced of Iran seeking to end hostilities through talks with the US and Israel.
Market speculation also plays a crucial role in determining oil prices, as traders make predictions about future production output and consumer demand. Additionally, supply constraint concerns and increased shipping costs have contributed to the rise in crude oil prices.
The impact of these rising oil prices is already being felt at the pumps. In the United Kingdom, petrol prices are expected to increase, ending a three-and-a-half-month period of declining prices. The average price of petrol in the US as of June 17, 2025, was $3.167 per gallon, and diesel fuel prices have been higher than regular-grade gasoline prices almost continuously since September 2004.
While some analysts express concern about the impact of rising oil prices on the global economy, others believe that certain factors, such as OPEC+'s production cuts and Asian demand, will help stabilize the market. The future trajectory of oil prices remains uncertain and largely depends on the evolving geopolitical situation and market dynamics.
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Demand for diesel fuel
Diesel fuel is an essential component of the global economy and has a wide range of applications, including transportation, electricity generation, and agriculture. The demand for diesel fuel has been relatively high in recent years, particularly in Europe, China, India, and the United States. This trend represents a shift from historical patterns where diesel fuel prices were typically lower than gasoline prices, except during cold winters when heating oil demand increased.
There are several factors contributing to the high demand for diesel fuel. Firstly, the rising energy demand driven by population growth and industrialization has led to an increased need for diesel fuel. Emerging markets are witnessing rapid industrialization, resulting in a surge in diesel usage across various industries, particularly the automotive and transportation sectors.
Another factor is the transition to less polluting diesel fuels. The shift towards lower-sulfur diesel fuels in the United States, for example, has impacted production and distribution costs, making diesel fuel more expensive. Additionally, the federal excise tax for on-highway diesel fuel in the United States is higher than the tax on gasoline, further contributing to higher diesel prices.
Despite the overall strong demand for diesel fuel, there have been fluctuations in specific regions. For instance, India experienced a 2.5% year-over-year decline in diesel sales in August, with a nearly 10% monthly decrease. This drop in demand coincided with a softening in India's manufacturing activity growth. However, it's important to note that diesel demand in the heavy-duty and transportation segment is projected to increase by 1% annually through 2050, according to ExxonMobil.
The future of diesel fuel demand is expected to be influenced by technological advancements and global market access. While the electrification of vehicles may lead to a decrease in diesel demand, a slowdown in fuel efficiency improvements could result in an increase in fuel demand by almost 3 million barrels per day by 2050.
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Excise tax on diesel
The price of oil has been increasing due to the ongoing conflict between Israel and Iran, which has resulted in higher diesel prices. Diesel fuel prices have been higher than regular gasoline prices for almost two decades now, with a few exceptions. One of the reasons for this is the higher demand for diesel fuel in Europe, China, India, and the United States. The transition to less polluting, lower-sulfur diesel fuels has also affected diesel production and distribution costs.
The federal excise tax for on-highway diesel fuel in the United States is 24.3 cents per gallon, which is 6 cents per gallon higher than the excise tax on gasoline. In the Philippines, there have been efforts to reduce the excise tax on fuel. House Bill No. 10438, approved in November 2021, intended to suspend the imposition of excise taxes on diesel and kerosene from December 1, 2021, to June 1, 2022. Additionally, Senator Grace Poe proposed Senate Bill No. 2445, which seeks the automatic suspension of excise taxes on regular gasoline, unleaded premium gasoline, and diesel.
The conflict between Israel and Iran has caused oil prices to rise by about $10 a barrel in a single week, which is expected to result in a 5p increase in diesel prices at the pump in the following months. As Iran is a significant oil producer, accounting for about 3% of global supplies, the risk of a broader regional military conflict has traders worried about potential supply disruptions.
The price of oil had been below the average recorded last year before the conflict, but the recent increase has put upward pressure on diesel prices. The market anticipates a limited conflict, but there is uncertainty about when the hostilities will end. As a result, diesel prices are expected to continue rising in the near future.
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Seasonal fluctuations
Diesel prices are influenced by a variety of factors, including seasonal fluctuations. In the fall and winter, the demand for heating oil impacts diesel prices. As heating oil and diesel fuel are produced simultaneously, an increase in heating oil demand can put pressure on the diesel fuel market. This dynamic is particularly notable in cold winters, where diesel fuel prices have historically exceeded gasoline prices due to the heightened need for heating oil.
Seasonal variations in agricultural demand also influence diesel prices. For example, in Latin America, the diesel market in the second quarter of 2024 remained stable despite seasonal shifts in agricultural demand, thanks to a balance between local manufacturing and imports. In contrast, during the last quarter of 2024, seasonal slowdowns in construction and agriculture in China reduced diesel demand, prompting refiners to lower prices.
Additionally, the summer motoring season in the United States affects diesel prices, as it leads to increased demand for gasoline. This factor interacts with other influences, such as geopolitical tensions and crude oil distribution concerns, to impact diesel prices.
Regional disparities in diesel prices can also occur due to localized market conditions and the distance between retail locations and supply sources. For instance, areas farther from the Gulf Coast, a significant source of U.S. diesel fuel production, tend to experience higher diesel prices.
The interplay of these seasonal fluctuations with broader economic trends, international demand, and supply dynamics shapes the diesel price landscape.
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Frequently asked questions
Diesel prices are primarily determined by the cost of crude oil, which regularly accounts for around 50% of end consumer prices. Demand for diesel fuel has been relatively high, especially in Europe, China, India, and the United States.
Diesel prices are rising due to a combination of factors, including supply restrictions, weak demand outlooks, and seasonal fluctuations.
Diesel prices are expected to increase by 2-3 cents per litre in the UK and by 3-6 cents in the US.
Aside from the oil price, another big factor that influences prices at the pumps is US demand for gasoline during the summer motoring season.
As of April 2025, the national average on-highway diesel price was $3.592, according to the US Energy Information Administration.
