Bullets and links:
Farmers are entering harvest season with the highest-ever diesel prices on record, which will deeply impact food prices.
The Strategic Petroleum Reserve is being drained to fuel export markets, which are under heavy strain after wars in the Persian Gulf and Europe.
It may be a boon for exports of Chinese electric tractor manufacturers, who enjoy supply chain monopolies on batteries and powertrain technologies, and have deep experience electrifying China’s agriculture.
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Report:
Good morning.
Diesel prices are near record highs, and that is deeply impacting industrial and businesses users, even in the United States and in other countries that are heavy producers of fossil fuels.
Diesel is critical on US farms, and the higher prices are pushing operating costs higher, and also transportation and freight expenses. Large farmers typically hedge their purchases of fuel and fertilizer, but even for the best-managed enterprises, the costs are rising, fast.
The wars on Iran, and in Ukraine are causing serious problems for farmers everywhere. Some smaller operators, who saw the big price surges earlier in the year, delayed their purchases, hoping prices would fall. But they didn’t, and now farmers are heading into harvest season with fuel costs two times the historical average.
Consumers and households focus on the pump prices for gasoline. But diesel fuel is the life blood for businesses, and those costs are blowing out. Diesel is in high demand worldwide, and there’s not nearly enough of it lately.
The US, China, and Russia have most of the refinery capacity for cracking crude oil into usable fuels, like gasoline, diesel, and jet fuel. But Russian refining capacity is down by a quarter since last year; a loss of 1.4 million barrels per day of fuels.
American refineries are running almost all-out, but nevertheless diesel inventories in the United States are far below historical averages, because of high export demand. The refineries that are in business, are earning nearly a hundred dollars per barrel on the crack spread, from crude to diesel. That spread is four times higher than normal and overall profit margins for refiners, per barrel, have doubled in a year.
Farmers are in bad spot, everywhere in the Northern Hemisphere, because these price spikes are hitting at the same time farmers need to be running their equipment hard to bring their harvests in. The all-time high for diesel prices was in 2022, but the August price for this year, 2026, is higher still, so farmers are rolling into fall facing their highest fuel bills ever.
Industry insiders don’t expect any relief; diesel is likely to go even higher. Here’s a strong example of how the high diesel costs are hitting ground transport: truckers in the United States are paying nearly $2 per gallon more for fuel, compared to a year ago. On average, a heavy rig is paying $388 more, per fill-up. Do that eight times a month, that’s over $3,100, in extra cost, every month, which will be passed along to their customers:
Russian diesel production is being locked down to meet domestic demand there, and the ban on exports may last through the end of the year. The exports markets that once were supplied by Russian refiners, then, are looking to American refineries instead, and prices are going up.
This makes for a political problem in the United States, with midterm elections coming up. The states that are most directly impacted by these higher diesel costs tend to be red states: of the top 20 states seeing the highest fuel cost increases, 18 of them voted for Trump in 2024; Illinois and Minnesota were the exceptions. Top 20 by percent increase, 18 of 20 again: Illinois and Washington:
None of that was supposed to happen, and Americans might have assumed that since the US is a net exporter of fuels, that implies that domestic markets would be fully supplied before ships got loaded to send to anywhere else. But that’s not how the energy markets work, and even the Strategic Petroleum Reserve is giving up barrels to exporters. That explains why farmers in Texas, for example, whose farms are in sight of oil rigs pumping away, are paying $70 million more for diesel fuel this year, compared to last.
Even North American farmers, then, can’t get away from wars happening halfway across the world. And this is the problem for farmers who are buying new equipment. Diesel tractors dominate farms, everywhere, because of the high demands placed on the equipment and the motors. But a farmer buying new equipment is in effect placing a call, for years of future diesel demand.
A heavy tractor—300 horsepower is about 220 kilowatts–with a typical expected lifespan, will require 158,000 gallons of diesel fuel. Utility tractors will burn 35,000 gallons over their useful lives. At today’s costs, a large tractor operator will spend $610,000 on fuel, and that is $237,000 higher than farmers budgeted for, compared to last year.
This report is dated 2025, and notes that the ag industry was already tilting toward electric tractors. Emissions regulations in Europe and the United States, and improvements in batteries were putting electric machines on the radar for farm operators, and this was months before the Strait of Hormuz was closed and Russian refineries were hit.
And more than anyone, China is likely to benefit most of all. The same Chinese supply chains and industrial processes that allow them to dominate production of electric vehicles, are being leveraged to electrify farm equipment.
Electric tractors are already widely deployed in China, and are bundled with Beidou and intelligent drive capabilities, and all-electric Chinese farms cut their operating costs by 80% compared to farms running diesel. Mobile charging and battery swapping technology is already here, on Chinese farms.
They are beyond the proof-of concept phase, in other words. The electric revolution is already underway in Chinese agriculture.
China has near-monopolies on the supply chains for batteries and electric drivetrains. Here we see evidence of “China Speed”, again, which means that improvements and new models roll out much faster than in other markets. There are over a dozen top suppliers for this equipment.
And in the electric tractor industry, they show same improvements in fast-charging, and in battery swapping, that turbo-charged the sales of Chinese electric cars across the world, are now becoming standard in Chinese electric tractors.
So today China is exporting electric tractors to Russia. Remember that Russia, too, is energy-independent, and farmers there are buying Chinese electric tractors, anyway.
Be Good.
Resources and links:
How soaring diesel prices squeeze American farmers
https://spectrumnews1.com/wi/milwaukee/news/2026/08/25/diesel-prices-wisconsin-soybean-farmer
The Price of Diesel, the ‘Workhorse’ of Fuels, Nears a Record High
https://www.nytimes.com/2026/08/26/business/energy-environment/diesel-prices-iran-war-oil.html
State-by-State Data — Rising Diesel Prices Significantly Increased Farmers’ Costs During the 2026 Planting Season
https://www.jec.senate.gov/public//_cache/files/37b255b8-91d9-43b0-8041-6b0d90cd150f/final---jec-fact-sheet-on-diesel-farming-costs.pdf
Diesel Prices Soar Ahead of Harvest Season
https://www.agriculture.com/diesel-prices-soar-ahead-of-u-s-harvest-season-12065301
Diesel Prices Are About to Break Records. Here’s Why They Keep Rising
https://www.thedrive.com/news/diesel-prices-are-about-to-break-records-heres-why-they-keep-rising
Russia to extend diesel export ban through September, sources say
https://www.reuters.com/business/energy/russia-extend-diesel-export-ban-through-september-sources-say-2026-08-25/
Diesel Dominates Farm Tractors, But Electric Transition Gains Momentum
https://www.china-tractors.com/Diesel-Dominates-Farm-Tractors-But-Electric-Transition-Gains-Momentum-id43483575.html
Will Chinese Electric Tractors Repeat the Success of Chinese EVs?
https://maquinac.com/english/will-chinese-electric-tractors-repeat-the-success-of-chinese-evs/
Tractor Fuel Calculator: Know Your Real Diesel Cost Per Acre
https://fuelconsumptioncalc.com/tractor-fuel-calculator
Inside the Global Squeeze on Diesel
https://www.api.org/news-policy-and-issues/news/2026/08/26/inside-the-global-squeeze-on-diesel
Turkey turns to US and India for diesel as Russian export ban bites
https://www.bairdmaritime.com/shipping/tankers/turkey-turns-to-us-and-india-for-diesel-as-russian-export-ban-bites
US Diesel Exports Surge to Record as World Grasps for Supply
https://www.hartenergy.com/energy-market-transactions/he-us-diesel-exports-stockpiles/
The U.S. Beat Its Oil-Export Record — Again — As Strategic Reserve Levels Drop
https://www.investors.com/news/energy-news-today-eia-record-crude-export-record-may-production/
SPR Gets Drained to Dump Crude Oil on Global Markets
https://wolfstreet.com/2026/07/31/spr-gets-drained-to-dump-crude-oil-on-global-markets-us-exports-of-crude-oil-petroleum-products-spike/
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Turns out, voting for Trump was a bad idea. Who could have known!
