According to AAA data, the national average price for gasoline in the US dropped to $3.98 per gallon on Tuesday. This marks the first time since July that prices have fallen below the $4 threshold, representing a decline of approximately 17 cents over the course of one week.
In contrast, diesel prices remain significantly higher, averaging $6.13 per gallon. Data from the Energy Information Administration indicates that gasoline prices fell by 12 cents in the week ending November 2, while diesel prices decreased by only 6 cents during the same period.
The disparity is driven by tight supply, as US distillate inventories fell to 99.3 million barrels in late October, which is 13% below the five-year average. The EIA projects that East Coast distillate stocks will remain approximately 20% below average throughout the winter season.
High diesel costs impact freight, with producer prices for truck freight rising 3.8% in September. Federal Reserve Governor Christopher Waller noted that energy shocks may influence inflation for a longer duration than pre-pandemic levels, as the Fed considers its next interest rate decision.
Market participants currently assign a 90.9% probability to a quarter-point rate hike to a range of 4% to 4.25% on December 9. A smaller 9.1% probability is assigned to a half-point increase, with diesel prices near $6 remaining a key factor in the Fed's policy outlook.
