Rising diesel prices threaten to push up costs across Texas

Gas prices are soaring as the war in Iran continues into a second week, and the impact is beginning to reach far beyond the pump. The rising cost of diesel is climbing even faster than gasoline — and that increase is poised to drive up prices across the economy.

Before fighting broke out in Iran, diesel averaged $3.24 a gallon in Texas. By Tuesday, prices were hovering around $4.80. Trucks rely on diesel, and nearly all consumer goods move by truck.

Higher fuel costs ripple outward 

So when diesel prices rise, the cost of transporting goods rises with it. "When fuel costs go up, that automatically gets passed through to whoever is paying for the shipment," said Bruce Bullock from the Maguire Energy Institute at SMU.

"Since trucks are used to ship a lot of goods in the U.S., that's going to feed through. The shipping costs go up, and that's going to put upward pressure on a lot of goods," said David Quigley, an economics professor at UT Arlington.

Impact depends on length of conflict 

How much more consumers end up paying will depend largely on how long the conflict lasts. The first price increases are expected in groceries, followed by electronics.

"A good portion of the food supply and most everything you see in a Walmart or a Target or other type of store is transported by truck," Bullock said.

The next sector likely to feel the impact is construction. "Diesel fuel for construction equipment and moving lumber and things like that, that's not going to help for new housing construction," Quigley said.

Inflation risk grows if prices climb 

Costs may continue rising. In summer 2022, early in the war in Ukraine, diesel prices peaked near $6 a gallon - a period when inflation approached 10 percent. The longer the conflict in Iran continues, the more consumers can expect to pay.