The Middle East is making diesel prices expensive in the US as they crossed $5 a gallon. Iran squeezes supply by blocking the Strait of Hormuz, leading to shortages across the homeland. Economists have warned that the surge in prices could soon lead to a slow global economic activity. Prices of day-to-day commodities will rise as the transportation of goods becomes expensive.
“Until we see a meaningful resumption of oil flows through the Strait of Hormuz, upward pressure on fuel prices is likely to persist,” said Patrick De Haan, head of petroleum analysis at GasBuddy. Supply chains have been stalled with no new shipments on the move from the Strait of Hormuz.
Also Read: Analyst Explains Why Bitcoin Is a Better Investment Than Gold
$5 a Gallon for Diesel Spikes Prices of Daily Essentials
The development also affects manufacturing, freight, and cargoes that carry goods from warehouses to the retail stores. The higher costs will eventually be passed on to consumers who have to foot the bill for consumption. Diesel prices crossing $5 a gallon have already caused a slump in revenue for major US retailers this month.
Spending has become less with consumers billing only what they require for day-to-day needs. Overconsumption has now come to a halt as prices on the shelves have surged. All of this while wages have remained stagnant and the two differ in value. The decline in sales also forced retailer Target to offer discounts on over 3,000 products to bring customers back to their outlet and start spending.
Despite pressure from the US and the Global South, Iran has yet to open the Strait of Hormuz. The last time diesel prices went above $5 per gallon in the US was in 2022, when the Russia-Ukraine war broke out. The Israel-Iran war, now in its third week, is further disrupting the supply of global oil. The markets are also reeling under pressure, with stocks in the Global South crashing.
