Energy-Driven U.S. Inflation Hit a Three-Year High in May as Transportation Costs Spread Through Food Supply Chains
Rising fuel costs are embedding in grocery prices and freight charges, with JPMorgan warning a super El Niño could add another 0.7 percentage points to global food inflation.
ICE Brent crude front-month held above $90 a barrel on Monday (2026-08-31), sitting at $90.58 as markets weighed an inflation picture already reshaped by months of elevated energy costs. The backdrop is not new, but it is deepening. U.S. consumer prices climbed 4.2% year-on-year in May (2026-05-31), the highest reading since April 2023 and up from 3.8% in April, according to Bureau of Labor Statistics data reported by OilPrice.com. Energy accounted for roughly 60% of that monthly increase, with energy prices up 3.9% month-on-month and 23.5% from a year earlier.3
The May CPI print was the clearest signal yet that the Iran-related oil price surge is transmitting broadly through the U.S. economy. Core CPI, which strips out food and energy, rose just 0.2% on the month and 2.9% annually, and core commodities actually fell 0.1%. The inflation problem, in other words, is almost entirely an energy problem.3
Food prices rose only 0.2% in May, but that figure understates longer supply-chain pressures already building. Tomatoes, a ubiquitous ingredient in American processed food, are nearly 25% more expensive than a year ago, the Economist reported. Some 90% of U.S. tomato imports come from Mexico, and in mid-2025 President Donald Trump withdrew from the Tomato Suspension Agreement and imposed a 17% levy on Mexican imports, compounding the pressure from higher transport and input costs. Fertilizers, which use natural gas as a feedstock, account for up to 40% of growers' input costs — making NYMEX Henry Hub front-month, sitting at $2.92/MMBtu on Monday (2026-08-31), a price that matters as much to food producers as to power generators.2
Freight is how energy costs move from farm to shelf. In Asia-Pacific, where businesses are absorbing a separate but related shock, more than 90% of heavy vehicles run on diesel, according to an analyst quoted by Asian Power. That single figure explains why fuel costs embed so quickly in the price of moving food across the region. U.S. diesel at the pump sits at $4.51 per gallon as of Monday (2026-08-31), providing little relief.5
The U.S. export picture is adding another complication. During the week of May 18 (2026-05-18), U.S. exports of crude oil and petroleum products hit a record 14.2 million barrels per day, according to Energy Information Administration data — 33% above the equivalent week in 2025. Over the same period, total U.S. crude and product stocks including the Strategic Petroleum Reserve fell by roughly 24.1 million barrels, one of the five largest weekly inventory declines on record. High export volumes drawing down domestic stocks put upward pressure on domestic fuel prices even as global supply increases.1
Gallup polling from that same week found 55% of Americans said their personal financial situation was getting worse — a record high in the survey's 25-year history. That reading is consistent with an economy where energy inflation is widely felt but unevenly distributed, hitting lower-income households hardest through fuel and food.1
The geopolitical overlay is not fading. JPMorgan warned on Friday (2026-07-24) that a "super" El Niño colliding with a supply-driven oil price shock could lift global food inflation by around 0.7 percentage points at its peak. The bank expects emerging markets to absorb most of that incremental shock, given that food accounts for a larger share of household spending in those economies. In India, already one of the world's largest oil importers, Brent trading near $85 earlier in the cycle revived household inflation concerns; with crude now above $90, those concerns have only intensified.7,6
Sub-$80 crude would help. Brent briefly fell to around $83 in mid-June (2026-06-15), raising hopes among consumers and analysts for some demand-side relief in food and transport costs. But that dip did not hold. WTI crude front-month was at $85.50 on Monday (2026-08-31), and with RBOB gasoline futures down sharply — off 11% in Monday's session (2026-08-31) — there is at least one signal suggesting product markets may be pricing in some demand softening ahead.4
Whether that gasoline move signals a broader softening in end-user energy costs or is a one-session anomaly is what traders will be watching through the week. The more durable question is whether El Niño-driven crop disruptions arrive before food supply chains have had a chance to adjust to the current energy price level — or whether they compound a shock that is already embedded in the data.7