Why Diesel Prices Raise the Cost of Everything
Consumers notice spikes in gas prices every time they drive to the gas station. But energy industry analysts say the current surge in diesel prices is historic and drives up the cost of all kinds of goods.
Diesel fuel prices are hovering around historical highs, driven by the same circumstances that caused gasoline prices to soar.
“Diesel price is probably the main headline here,” said Patrick De Haan, head of oil analysis at GasBuddy.
Almost everything people buy is transported in a diesel-powered car at some point. Ships and barges, trains, trucks and even some aircraft run on diesel fuel.
On March 12, diesel hit an all-time high of $5,135, according to AAA. As of April 27, the price was only slightly lower at $5,093.
The increase has hit consumer prices hard, says Mark Zandi, chief economist at Moody’s Analytics, who notes that diesel fuel has played a major role in driving up inflation.
It will also hit truckers hard. Truck drivers who used to spend about $10,000 a week on fuel now spend about $18,000 a week.
Freight industry analysts suspect that the highly fragmented and volatile trucking industry is likely to experience another severe recession. Some even call it a “bloodbath”.
“We see when fuels rise as strongly as they have in the last couple of months, it is usually followed by a lot of trucking bankruptcies,” said Craig Fuller, founder and CEO of Freightwaves, an industry data tracker.
This is bad news for America’s nearly 2 million trucking companies, the vast majority of which are small businesses with just a few trucks.
“These smaller operators, living primarily off their freight cash flows, are not prepared and do not have balance sheets or a cash position to offset these instantaneous shocks in their cash flows,” Fuller said.
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