STEVE INSKEEP, HOST:
Maybe you've had this experience recently. You're driving past a gas station. You see the price for gas. You say, wow. And then you see the other number, the number for diesel. And that's a big wow 'cause it's even higher. This morning, the national average for diesel is more than $6.51 per gallon, according to AAA. That's another economic consequence of the war with Iran. And when energy is more expensive, it affects the cost of everything else. Here to tell us more is NPR's Stephan Bisaha. Good morning, sir.
STEPHAN BISAHA, BYLINE: Good morning. Maybe not a good morning for commuters, unfortunately.
INSKEEP: No. No.
BISAHA: But good morning.
INSKEEP: No. You're in Alabama. I assume it's pretty expensive there, as well as here in Washington, D.C. How quickly are prices rising?
BISAHA: Yeah. they are rising shockingly fast right now. Like, the previous record was 5.85, and that was broken at the start of the month, and now we are already 66 cents higher...
INSKEEP: Wow.
BISAHA: ...Than that. Most drivers, they are probably paying more attention to the cost of filling up gasoline. That's also gone up about 38 cents this month. Jet fuel has also been climbing, and that's not far ahead of Americans starting to book, like, Thanksgiving and other holiday travel. But really, diesel has seen these steepest climbs lately.
INSKEEP: And why does that matter so much to the economy?
BISAHA: Yeah. Talk to people filling up a diesel, and they give you a simple answer. If you want to haul something heavy, you use diesel. Diesel is literally the fuel the U.S. economy runs on. It's more fuel efficient than gas. And when you're hauling tons of furniture or wheat or candles or whatever goods you want to across the country, diesel is generally how you do it. And in some cases, the drivers filling up with diesel are passing along some of those higher fuel costs to other businesses. We're not seeing that hit store shelves necessarily yet, but we are bracing for it.
INSKEEP: Yeah, sure. So this is part of the inflation picture. The Federal Reserve...
BISAHA: Yeah.
INSKEEP: ...Did just raise interest rates, which is their marquee tool against inflation, but does it help with diesel?
BISAHA: Unfortunately not. I mean, interest rates don't really affect fuel prices. Now, higher interest rates can help tamp down other sources of inflation. Like, if diesel is the literal fuel behind the economy, borrowed money is this figurative fuel for the economy. Borrowing is how people buy houses. I mean, think mortgages. Businesses borrow to grow and build. Like, there is a ton of borrowing happening right now to fund data center construction.
INSKEEP: Yep.
BISAHA: So the Federal Reserve raising interest rates is - it's all about making borrowing more expensive. And the idea is that would slow economic activity and, ideally, with it slow inflation. But diesel prices going up, that is not about borrowing. That is primarily about the closure of the Strait of Hormuz and other oil routes, along with high cost of refining. More expensive borrowing doesn't get more oil out of the Middle East or make that oil any cheaper to refine. So the Fed raising rates could help with other causes of inflation, but when it comes to diesel, there's not much the Fed can do.
INSKEEP: NPR's Stephan Bisaha. Thanks for the update.
BISAHA: Thanks, Steve. Transcript provided by NPR, Copyright NPR.
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