The 2024 Election and Diesel Prices: What Businesses Should Prepare For

The outcome of the 2024 U.S. presidential election is expected to have a major impact on fuel prices, particularly diesel, which powers much of the transportation, construction, and industrial sectors. While many factors influence fuel prices—including global supply chains, environmental policies, and geopolitical events—the political direction set by the next president could be a key driver in shaping diesel costs over the next few years.

As of September 2024, diesel prices are hovering between $4.50 and $5.00 per gallon, depending on location. This significant increase compared to pre-pandemic prices is driven by multiple global and domestic factors that are intricately connected.

1. Global Supply Shortages

One of the most significant drivers behind the elevated diesel prices is the global oil supply crisis exacerbated by the war in Ukraine and the corresponding sanctions on Russia, a major global exporter of oil.

• Russia’s Role in Global Oil Supply: Russia is one of the world’s largest oil producers, accounting for around 11% of global oil supply before the invasion of Ukraine in 2022. With the ongoing sanctions placed on Russian oil exports by Western nations, particularly in Europe and the U.S., supply has been significantly reduced. These sanctions have also complicated the logistics of oil transport and increased uncertainty in the market​.

• OPEC Production Cuts: In parallel, the Organization of the Petroleum Exporting Countries (OPEC) has made intentional production cuts in recent years to manage oil prices, especially in response to inflation and demand fluctuations during the pandemic. The combination of OPEC’s production strategy and sanctions on Russia has resulted in a constrained global oil supply, driving up prices of refined products like diesel.

These supply shortages place a higher premium on available crude oil, which in turn leads to elevated diesel prices worldwide.

2. Environmental Regulations and Refining Costs

Another key factor influencing diesel prices is the increasing cost of refining due to stricter environmental regulations.

• Low-Sulfur Diesel Regulations: Over the past decade, governments worldwide have mandated reductions in the sulfur content of diesel fuel to reduce harmful emissions that contribute to air pollution. For example, the U.S. requires ultra-low sulfur diesel (ULSD), which contains no more than 15 parts per million (ppm) of sulfur. While these regulations are essential for environmental health, they have increased refining costs because the process to remove sulfur from diesel is energy-intensive and requires more advanced refining technologies.

Transition to Renewable Fuels: There is a growing shift in policy favoring renewable diesel and cleaner fuels. This transition often comes with government incentives but also adds pressure on traditional diesel refineries to meet stricter emissions standards. These added compliance costs are passed on to consumers, contributing to the current high diesel prices.

3. Inflationary Pressures

The broader issue of global inflation is another major factor driving diesel prices. Inflation has a ripple effect on the entire supply chain, affecting the cost of production, transportation, and raw materials.

• Cost of Raw Materials: The raw materials used in diesel production—crude oil, chemicals for refining, and even the machinery needed to extract and refine oil—have all become more expensive. Supply chain disruptions, such as those caused by the COVID-19 pandemic and geopolitical tensions, have worsened these costs.

• Labor Costs: Higher labor costs, both in the oil industry and across logistics and transportation sectors, further increase the cost of producing and delivering diesel. Labor shortages, particularly in trucking and logistics, have increased wages and made transportation of oil products more expensive.

• Supply Chain Bottlenecks: Ongoing global supply chain challenges, including port congestion, have exacerbated transportation costs. These bottlenecks, especially for shipping crude oil and refined products like diesel, have further increased fuel prices.

With the U.S. presidential election looming, businesses are watching closely to see how the outcome could influence fuel prices. Let’s examine the potential outcomes for diesel prices depending on whether Donald Trump or Kamala Harris becomes the next president.

If Donald Trump Wins

A Trump victory in 2024 is expected to bring policies that favor the fossil fuel industry and prioritize domestic energy production.

• Expanded Domestic Oil Production: Trump’s administration previously focused on increasing domestic oil production through policies like deregulating drilling on federal lands and reducing restrictions on offshore drilling. A similar approach in his second term could stabilize or potentially lower diesel prices by increasing domestic crude oil supply. The U.S. could once again become a net exporter of oil, reducing dependence on foreign oil sources and creating downward pressure on diesel prices.

• Rollback of Environmental Regulations: Trump’s administration is likely to roll back environmental regulations that increase production costs for diesel refiners, such as sulfur content restrictions and emissions regulations. By reducing these compliance burdens, the cost of refining diesel could decrease, which may result in lower diesel prices in the short term.

• Potential Trade and Geopolitical Risks: While increased domestic production may alleviate some price pressure, Trump’s foreign policy could bring new risks. His administration’s use of sanctions, such as those against Iran and Venezuela, could destabilize global oil markets, leading to price volatility. For example, tensions with these oil-producing nations could limit global oil supplies further, leading to price spikes despite higher U.S. production.

If Kamala Harris Wins

A Kamala Harris administration would likely focus on transitioning the U.S. to renewable energy and stricter environmental regulations, which could influence diesel prices differently.

• Stricter Environmental Policies: Harris would likely push for tighter emissions standards and a faster transition away from fossil fuels. This includes further reducing the sulfur content of diesel and encouraging the use of renewable diesel. These policies would increase production costs for diesel, as refineries would need to invest in cleaner technologies and processes.

• Investment in Green Energy: While Harris’ administration may promote electric vehicles and renewable energy, reducing the demand for diesel in the long term, the immediate impact of the transition may cause diesel prices to increase. The reliance on diesel for heavy industries, including trucking and construction, means that until alternative energy sources become mainstream, diesel prices could remain high due to regulatory pressure.

• International Climate Cooperation: Harris is expected to strengthen the U.S. role in international climate initiatives, such as the Paris Climate Agreement. This could introduce new regulations on global oil producers and restrict their operations, potentially leading to higher diesel prices as the industry adjusts to cleaner, more expensive production methods.

As the 2024 election draws near, it’s clear that diesel prices will be affected no matter who wins. If Donald Trump takes office, we could see more domestic oil production, which might help bring diesel prices down or at least keep them stable. However, with his track record of sanctions and trade tensions, there’s always the risk of price spikes due to international conflicts or restrictions. On the other hand, a Kamala Harris presidency would likely lead to tighter environmental regulations and a shift toward greener energy, which could push diesel prices up in the short term as businesses adapt to stricter standards and cleaner fuels.

For businesses that rely on clear diesel, red diesel, gas, and def, and industries that require a constant fuel supply, staying flexible and prepared for these potential shifts will be key. At Anytime Fuel Pros, we’re dedicated to providing reliable fuel solutions that help you navigate these changes. Whether prices go up or down, having a trusted fuel partner will be essential to keeping operations smooth and costs manageable.

No matter who ends up in the White House, one thing’s certain: the fuel market will keep evolving, and businesses that stay informed and adaptable will be the ones that come out on top.