coindesk.com
U.S. diesel prices have surged to an all‑time high, marking the latest flare‑up in a broader energy shock that is reigniting inflation fears across global markets.
The national average price for a gallon of diesel hit a record $6.29 this week, up nearly 80% year to date, according to TradingView. Bitcoin is down nearly 12% at $76,400 for the year while gold is largely unchanged, having retraced from the record high of $5,600 reached early this year.
Such spikes in pump prices typically feed through to transport costs, supply chains and, ultimately, consumer prices.
“Higher diesel prices can show up in inflation through business costs first, then potentially affect consumer prices over time depending on pass-through and demand,” JPMorgan said in a note Tuesday.
The timing could hardly be worse. Central banks are already on high alert and inclined to hike interest rates, making credit more expensive even though higher rates are unlikely to address the key source of inflation: disruptions to oil supplies from the wars in Iran and Ukraine.
Diesel is rising mainly because of geopolitical tensions in the Middle East, including the ongoing U.S.–Israeli conflict with Iran, which has disrupted crude flows and raised risk premiums on refined products. Tight refinery capacity and strong demand from both freight and industrial users have amplified the move, turning a regional supply shock into a global price spike.
The Fed’s Wednesday rate hike is evidence of how policymakers are biased toward using rate increases to tackle inflation stemming from oil‑supply shocks, a mistake, as per some observers.
Record diesel prices therefore present a headwind for gold, bitcoin and technology stocks. Like gold, bitcoin is widely seen as a store of value and sovereign hedge. However, historically, higher borrowing costs have weighed on the cryptocurrency’s market value, as seen during the 2022 Fed tightening cycle.
On Thursday, the Fed hikes rates by 25 basis points, lifting the benchmark borrowing cost to the 3.75%-4% range. Goldman Sachs and Morgan Stanley expect another 25 bps hike in October.
Other central banks are also tightening. The European Central Bank recently hiked rates, and the Bank of Japan (BOJ) is expected to do the same on Friday.