High diesel prices squeeze Montana farmers

Diesel prices in Montana have been trending up since the start of the U.S.-Iran conflict in late February and are now near record highs, raising costs for farmers, truckers and other businesses that have little choice but to keep buying fuel — and potentially pass some of those costs further down the supply chain.

Data from GasBuddy, a fuel price tracking service, showed Montana’s average diesel price at $6.23 a gallon Wednesday, up $2.58 from a year ago and just below the record $6.31 statewide average set Sept. 24. 

For Montana’s agricultural producers, the immediate impact is often a tighter profit margin, said Eric Belasco, an agricultural economics professor at Montana State University. 

Farmers can’t simply stop running combines and other diesel-powered equipment when prices rise. And because they sell into competitive commodity markets, Belasco said, individual producers have limited ability to raise prices to compensate for higher input costs.

“A lot of farmers are going to see high input prices, and there’s not a whole lot you can do with that,” Belasco said. “So a lot of them are eating the cost at the farm level.”

Nationally, the U.S. Department of Agriculture now forecasts that American farmers will spend an additional $4.8 billion, or about 29% more, on fuel and oil in 2026 compared to the prior year.

The impact of diesel prices specifically is broader still because of its use in trucking and rail freight.

Belasco said even fuel costs that don’t directly appear on a farm’s balance sheet can raise the cost of food after it leaves the farm. The U.S. Energy Information Administration likewise says high diesel prices contribute to higher road and rail freight costs across the economy.

Those rising prices have been driven by a tightening supply of diesel and other distillate fuels globally.

Patrick De Haan, head of petroleum analysis at GasBuddy, said disruptions to output at overseas refineries have sharply tightened global supplies of diesel. The U.S. Energy Information Administration similarly points to reduced refining capacity in Russia, China and the Middle East, combined with elevated crude oil prices, as a cause of rising prices at the pump. U.S. distillate inventories — a category that includes diesel — are expected to remain unusually low through much of 2027.

De Haan said the Russian diesel supply that normally accounts for one out of every nine barrels on the market has been halted due to Ukrainian attacks on Russian refineries, causing a shortfall in the market and driving prices up.

U.S. refiners have little spare capacity to fill that gap, with many entering their maintenance season, De Haan said. 

Montana and other interior states have been slightly insulated from the largest increases because fuel produced there has fewer avenues for reaching overseas markets, De Haan said. Coastal markets are more directly tied to global diesel prices.

Exactly what happens to diesel prices next is hard to predict. 

De Haan said prices are unlikely to meaningfully decline without some easing of the geopolitical disruptions that are affecting oil supply and refinery output. But trying to put a number on where prices are headed, he said, is essentially impossible.

“I have no expectations. The markets are telling me I can’t, really,” De Haan said. “We could go a dollar a gallon higher, we could go a dollar a gallon lower. I have no idea which of those it’s going to be.”