For the first time ever, 10-year bond yields track diesel prices more closely than crude, and Trump’s fuel deal with Putin may be too little too late

Diesel prices have come off their all-time highs in recent weeks, but the key industrial fuel has already moved the needle across the economy and financial markets, making affordability a more potent issue in the midterm elections.

The national average for diesel is about $6.277 per gallon, according to AAA , down from its $6.528 high but still 71% above year-ago levels.

By contrast, U.S. crude oil is up 56% from a year earlier as damage to refining capacity in the Middle East and Russia has produced a sharper crunch in fuel markets.

Because diesel is a critical input in manufacturing, agriculture and logistics, the recent price surge has been felt broadly.

The latest consumer and producer price indexes showed jumps in transportation costs, while purchasing manager surveys signaled big spikes in prices businesses are paying.

“This is why products have been trading at double the price of crude during the past few months, something that has never happened before.

Ultimately, diesel and gasoline drive inflation, not crude oil,” Amrita Sen, director of market intelligence and co-founder at Energy Aspects, wrote in the Financial Times on Wednesday.

And as higher fuel costs keep inflation forecasts elevated, markets are pricing in a more hawkish Federal Reserve that’s ready to hike rates further.

Bond yields have risen in anticipation of tighter monetary policy, raising borrowing costs for consumers.

Crude prices had previously moved in tandem with prices for refined products and had long been a proxy for those costs, but that relationship has broken down, according to Sen.

“In fact, since May, 10-year US Treasury yields have correlated more closely with diesel prices than crude prices, for the first time ever,” she added.

That’s why the Trump administration has started paying more attention lately to bringing down diesel prices, Sen said.

Over the past week alone, President Donald Trump has taken steps to ease the cost burden.

On Monday, he signed an executive order to defer the 24-cent federal tax per gallon on diesel until the end of the year, though most states have separate levies on diesel.