Diesel crossed $5 per gallon this week for only the second time in U.S. history. That may matter more for inflation than the $3.91 regular gasoline everyone is talking about.

The United States Gasoline Fund LP (NYSE:UGA) is up roughly 50% over the past month.

The VanEck Oil Refiners ETF (NYSE:CRAK), which tracks companies refining crude into diesel and other fuels, is trading near its 52-week high as refining margins widen.

The root cause remains the Strait of Hormuz, which has been effectively closed since the start of the Iran war. Diesel has spiked harder than gasoline because the U.S. mostly produces light crude, better suited for gasoline refining.

Why Diesel May Matter More Than Gasoline Right Now

Consumers are focused on gas prices, but economists say diesel is the bigger threat to the broader economy.

Diesel powers the semitrucks, trains, tractors and construction equipment that keep American supply chains moving. It’s the trucking industry’s second-largest expense after driver pay, accounting for roughly a fifth of operating costs, according to Bob Costello, chief economist at the American Trucking Associations.

The cost of moving a barge from New Orleans to Owensboro, Kentucky, reportedly jumped 27% from February to late March, according to Anton Posner, CEO of logistics provider Mercury Resources.

Even data centers rely on diesel backup generators when the grid goes down.

The Inflation Math

Joe Brusuelas, chief economist at RSM US, estimates a 10% rise in diesel could imply a 0.1% increase in headline CPI.

At current elevated levels, that may translate to as much as a 0.4% bump in the inflation reading.

Fed Chair Jerome Powell said Wednesday that policymakers are “watching” diesel’s surge, according to Bloomberg, adding that the effects on core inflation are “quite real” and “material.”

What Polymarket Is Pricing

It’s showing up in prediction markets. A Polymarket contract gives a 95% chance CPI tops 3% this year, 41% it breaks 4%, and 24% it hits 5%. All three strikes have surged since the war began.

Bettors are pricing an 86% chance the national gas average breaks $4.00 by the end of the month. The $4.25 strike sits at 67%. The $4.50 contract trades at 21%.

How long prices stay elevated likely depends on how long the war lasts. The next test comes April 10, when the March CPI print lands.

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