US diesel prices hit record $5.85 as Trump’s Venezuela oil deal faces scepticism

Drivers in the US are paying more than ever for diesel at the pump as the US-Israel war with Iran continues to affect global energy supplies. The average cost of a gallon of diesel hit $5.85 on Friday, a 58 percent increase from $3.71 a year ago, AAA reported. The previous record was set following Russia's full-scale invasion of Ukraine.

Diesel is used primarily by commercial vehicles in the US, including trucks, trains, boats, buses, farming vehicles and construction vehicles. Fuel prices have soared since the Iran conflict began at the end of February, reflecting a surge in wholesale oil prices as Iran responded to the war by effectively closing the Strait of Hormuz, a narrow but critical chokepoint for global oil shipments.

In response to rising fuel costs, US President Donald Trump recently pledged to "substantially lower Gas Prices for all Americans" through an oil deal with Venezuela. The agreement, announced on Saturday, calls for the development of 17 strategic oil fields with a proven potential of 65 billion barrels, as well as "an investment of more than $100bn and more than $209bn in taxes" for Venezuela, according to interim Venezuela President Delcy Rodríguez. A US official told CBS News that the US government will retain 55 percent control of a joint venture with an "experienced private operator in Venezuela."

The deal follows the capture of former Venezuelan leader Nicolás Maduro by US special forces in January, in a raid authorized by President Trump. However, some analysts have reacted with scepticism, questioning whether the agreement would address long-running obstacles that have deterred investment in Venezuela's oil industry.

Why This Matters

Diesel price hikes directly increase costs for transporting goods, which can lead to higher prices for consumer products across the board.
The record comes as the US approaches November midterm elections, making fuel costs a potent political issue.
The ongoing Iran conflict and closure of the Strait of Hormuz continue to strain global oil supplies, with no immediate end in sight.

Background

Diesel prices are a key economic indicator in the US because the fuel powers most commercial transportation. When diesel costs rise, the expense is typically passed down the supply chain to consumers. The current crisis stems from the US-Israel war with Iran, which began in late February. Iran's effective closure of the Strait of Hormuz — a narrow waterway through which about a fifth of the world's oil passes — has severely limited global oil supplies. The previous diesel price record came after Russia's full-scale invasion of Ukraine in 2022, which also disrupted energy markets.

Key Perspectives

US Government: The administration has pursued a deal with Venezuela to develop 17 strategic oil fields, with the US retaining majority control of a joint venture. Trump has promised the agreement will lower gas prices for Americans. Venezuela's Interim Government: Interim President Delcy Rodríguez has framed the deal as bringing over $100bn in investment and $209bn in taxes to Venezuela. Analysts and Skeptics: Some experts have expressed doubt about whether the deal can overcome longstanding obstacles to investment in Venezuela's oil industry, including political instability, infrastructure decay and sanctions.

What to Watch

Whether diesel prices continue to climb or begin to stabilize as the Venezuela deal develops.
Any progress or setbacks in reopening the Strait of Hormuz as the Iran conflict evolves.
The impact of rising fuel costs on the November midterm election campaigns and voter sentiment.

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