TEXAS — An economic domino effect is playing out across the country and in Texas, as diesel prices remain at a record high. Economists say consumers may feel the impact for some time, as tensions in the Middle East continue.
It takes tons of diesel to fuel up the barges and vessels traveling from around the world and through the Houston Ship Channel in La Porte, near the historic San Jacinto Battleground site about 20 miles east of Houston, transporting tones of freight, gasoline, jet fuel and diesel.
“The Port of Houston is the second busiest across the nation, but we are the petrochemical heart of America, and of course Texas and the Gulf Coast,” said Ed Hirs, an economics expert and professor at the University of Houston we spoke with on location.
Diesel fuel also powers the ships that bring in crude oil and the refineries on the ship channel, where he says crude oil is refined and distributed.
“Everything that we’re viewing here, diesel is at the backbone of those engines,” he said.
Hirs says record-breaking diesel costs are affecting industries across the globe and here in Texas.
“When Iran blockaded the Strait of Hormuz, that took a lot of oil and refined products off the market. In particular, it took 20% of the global supply of LNG off the market, and those nations that relied on the LNG instantly switched to diesel,” he said, referring to liquified natural gas.
Diesel in Texas is now at an all-time high at about $6 per gallon.
“That diesel’s going to be bought. That price is going to get pushed right through to the consumer right away,” Hirs said, calling it great for refineries, but a domino effect for consumers at the pump and in grocery stores. “The high cost of diesel is hitting the school districts. It’s hitting the garbage collection agencies. It’s hitting city servicing. It’s hitting road repairs.”
He says tariffs imposed by the Trump administration are also contributing to rising costs and doing so on the consumer’s dime.
Trucking companies are also feeling the impact, according to truckers at a nearby Love’s Travel Stop in Deer Park.
“I’ve been driving 41 years. When I first started driving 18-wheelers, we were paying 89 cents a gallon,” said one driver, who is now paying about seven times that amount four decades later.
Hirs says truckers and consumers can expect to see rising diesel for the next four to six months, but he also says they should keep it all in perspective.
“Keep in mind the value difference here. We’re complaining about the cost of diesel for $6 a gallon. A gallon of Starbucks costs you $25,” he said.
Hirs also says if peace was established today in the Middle East, it could still take more than a year to restore the dislocations of diesel and crude oil from across the global market.