Diesel prices have reached record territory in the United States, creating new challenges for trucking companies, farmers, construction firms, municipalities, transit agencies and virtually every business that depends on diesel-powered equipment.
According to the U.S. Energy Information Administration, the national average retail price for on-highway diesel reached $6.285 per gallon on September 14, 2026—surpassing the previous highs experienced in 2022. In the Midwest, diesel averaged $6.25 per gallon.
Unlike gasoline, the impact of rising diesel prices extends far beyond what drivers see at the pump. Diesel powers much of the equipment responsible for moving, producing and delivering goods throughout the U.S. economy. Trucks move food and consumer products, agricultural equipment plants and harvests crops, construction equipment builds infrastructure, and diesel-powered vehicles provide essential public and private services.
When the cost of fueling those vehicles increases, businesses have limited options. Higher fuel expenses can reduce operating margins, delay equipment investments and increase the cost of moving freight. Eventually, at least some of those costs can work their way through the supply chain in the form of higher transportation charges and higher prices for goods and services.
That makes expanding the nation’s diesel fuel supply increasingly important—and biodiesel and renewable diesel are already helping.
Biobased Diesel Adds Supply and Helps Moderate Prices
Biodiesel and renewable diesel are sometimes discussed primarily in terms of their emissions benefits, but their contribution to the nation’s fuel supply can also provide an important economic benefit.
Research highlighted by Clean Fuels Alliance America found that expanded U.S. biodiesel and renewable diesel production reduced the price of petroleum diesel by approximately 4% in 2021. More recently, Clean Fuels has cited the research to estimate that, without U.S.-produced biodiesel and renewable diesel supplementing the nation’s heavy-duty fuel supply, diesel prices would be approximately 4% higher on average in the short run.
At today’s historically high diesel prices, that additional supply takes on greater significance.
Biobased diesel effectively expands the pool of fuel available to serve diesel-powered vehicles and equipment. Every gallon of biodiesel or renewable diesel entering the market is another gallon of transportation energy available to help satisfy demand. That additional supply can help reduce pressure on conventional diesel markets, particularly when petroleum markets and refining capacity are constrained.
The impact is already substantial. Biodiesel and renewable diesel supplied approximately 9% of U.S. on-road diesel demand in 2024, according to Clean Fuels Alliance America.
Fleets Can See Savings at the Pump, Too
The economic benefit is not limited to the broader fuel market.
Clean Fuels cites U.S. Department of Energy Clean Cities and Communities data showing that B20 biodiesel blends have averaged approximately 14 cents per gallon less than petroleum diesel since 2021. While actual pricing varies considerably by region, supplier, feedstock markets, and other conditions, the data demonstrate that choosing a lower-carbon fuel does not necessarily mean paying a premium.
For high-mileage fleets, even relatively small differences in per-gallon fuel costs can become meaningful.
A fleet consuming one million gallons annually, for example, spends an additional $100,000 each year for every 10-cent-per-gallon increase in its average fuel price. For large trucking companies, municipalities, transit agencies, construction companies, and agricultural operations consuming millions of gallons annually, sustained increases in diesel prices can quickly translate into hundreds of thousands or millions of dollars in additional operating expenses.
Those costs matter not only to fleet operators but also to the customers and communities they serve.
State Policies Can Make Higher Blends Even More Competitive
Several states have demonstrated how policy can encourage greater use of domestically produced biobased fuels while also providing opportunities to reduce fuel costs.
Illinois provides one of the clearest examples.
Beginning April 1, 2026, qualifying diesel containing more than 19% biodiesel or renewable diesel is exempt from certain state sales taxes through November 30. During the winter months, the threshold drops to blends containing more than 10%. The structure creates a direct economic incentive for fuel marketers and consumers to use higher biobased diesel blends.
Iowa takes another approach. As of July 1, 2026, the state fuel tax on B20 and higher blends is 29.5 cents per gallon, compared with 32.5 cents for conventional diesel and blends below B20. Iowa also offers qualifying retailers a biodiesel blended fuel tax credit, including a 7-cent-per-gallon credit for B20.
Minnesota has taken a market-based volume approach through its biodiesel standard. During the warmer months, most No. 2 diesel sold in the state must contain 20% biodiesel, with lower seasonal requirements during colder months. That policy has integrated biodiesel into Minnesota’s conventional diesel supply rather than treating it solely as a specialty alternative fuel.
The policies differ, but each illustrates how states can expand the market for biobased diesel through tax incentives, fuel standards or a combination of approaches.
More Than an Environmental Strategy
The current diesel market is an important reminder that fuel diversity has value beyond emissions reductions.
Biodiesel and renewable diesel add domestically produced gallons to the nation’s transportation fuel supply while providing fleets with fuels that can be used in existing diesel vehicles and infrastructure. At a time when conventional diesel prices are reaching record levels, those additional gallons can help diversify supply, increase competition and moderate the economic impact of tight petroleum markets.
That matters throughout the economy.
Lower fuel costs help farmers control the expense of producing food. They help trucking companies manage freight costs. They help construction companies control project expenses and municipalities stretch taxpayer dollars further. And because transportation costs are embedded in nearly everything Americans purchase, reducing pressure on diesel prices can ultimately benefit consumers as well.
Biobased diesel cannot single-handedly determine the price of diesel. Global crude oil markets, refining capacity, inventories, transportation costs and regional market conditions all play significant roles in determining what fleets pay.
But biodiesel and renewable diesel represent something increasingly valuable in a tight fuel market: additional supply that is already being produced domestically and used at commercial scale.
With diesel above $6 per gallon nationally, the economic case for expanding that supply deserves attention alongside the environmental benefits.
More biobased diesel means more gallons available to fuel America’s economy—and research indicates those additional gallons can help keep diesel prices lower than they otherwise would be.
Notice: The Michigan Advanced Biofuels Coalition (MiABC) does not lobby or influence policy in any way. The policy interests of Michigan soybean farmers and biodiesel producers are supported by the Michigan Soybean Association and Clean Fuels Alliance America, respectively. This post is for educational purposes only.
Image Credit: iStock by Getty Images. Used under license.