If it moves, builds, or gets stocked, diesel is probably involved. That reach is exactly why Slok, Apollo Global Management's chief economist, says diesel behaves differently from gasoline in the inflation data. On Bloomberg Television's Surveillance on Friday he said, "When diesel prices go up, that is really entering elsewhere in the CPI basket than in the energy line." Because freight and construction run on diesel and demand is hard to dial back, higher costs tend to get pushed through to companies and shoppers. In a research note this week, he argued that a fuel as central as diesel does not neatly sit in the energy bucket, writing that "The rise in diesel prices does not stay in the energy line of the CPI but migrates with a lag into core goods and services, which is exactly the kind of pass-through the Fed cannot dismiss as transitory."
Drivers have felt a pinch at the pump since the US war with Iran threw Persian Gulf crude shipments off course, and the strain has been even worse for diesel users. By Thursday, the US average price of diesel had surged 83% this year to $6.50 a gallon, versus a 59% rise for gasoline. Slok's point is that diesel's reach - from retail logistics to data center construction - means those costs are likely to filter into core categories over time rather than staying isolated in energy.
The Fed lifted rates on Sept. 16, its first increase since 2023, with inflation still running above its 2% target. Minutes from the July meeting indicated most officials expected "earlier energy price increases" to fade and help cool inflation later this year. Chicago Fed President Austan Goolsbee struck a note of caution this week, saying, "Once supply shocks to inflation become persistent, some of the logic behind 'looking through' no longer holds." Slok also described the central bank's apparent best case in the current backdrop: if the Iran war gets resolved and energy pressures ease, it could remove the need for additional hikes. He called that outcome "the Hail Mary right now."
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So why has growth held up despite higher rates and pricier fuel? Slok points to an AI investment wave. He estimates AI-related activity is currently adding about one percentage point to GDP and making up roughly half of total growth through data center building, higher energy use, software spending, and a wealth effect from strong equity markets. If diesel keeps seeping into core inflation while AI props up demand, the picture that matters for your mortgage rate, your cash yields, and your grocery bill could stay stickier than the energy line suggests.
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