Spiking US diesel prices keep trucking industry stuck in years-long slump
By Lisa Baertlein
LOS ANGELES, March 27 (Reuters) - The U.S.-Israeli war on Iran has sent U.S. diesel prices up 50%, delaying a long-awaited trucking industry turnaround and squeezing cash flow and profits for independent big-rig drivers.
The national average diesel fuel price hit $5.38 per gallon on Friday, according to data from the American Automobile Association, up from about $3.61 a year earlier and not far behind the highest recorded price of $5.82 in June 2022. That was nearly four months after Russia invaded Ukraine.
In California, the most populous U.S. state and home to its busiest container seaports, the diesel price hit a record $7.17 per gallon on Friday. The diesel price in Washington state also soared to an all-time high of $6.55 per gallon, according to AAA data.
Transportation is on the front lines of the historic energy disruption tracing to Iran's chokehold on the Strait of Hormuz, a narrow stretch of water off its southern coast through which roughly one‑fifth of the world’s oil and liquefied natural gas normally passes. While the U.S. is well supplied with diesel, prices have spiked because oil trades on a global market.
"The guys really getting squeezed are the small carriers that can't negotiate a higher rate because demand is still flat," said Dean Croke, principal analyst at freight analytics firm DAT, nodding to the U.S. trucking industry's four-year slump.
Independent truckers often work on a per-load rate that includes fuel and have less leverage when it comes to negotiating more money when diesel prices soar.
Large contract trucking firms like FedEx FDX.N, JB Hunt JBHT.O and CH Robinson CHRW.O account for about 80% of the market and use surcharges to recoup higher fuel costs. Those big players also can hedge fuel risks and use their heft to negotiate lower prices. Thus far, customers are not pushing back on diesel costs, FedEx and analysts said.
Truckers often pay fuel bills soon after purchase, but customers often have 30 days or even longer to pay for the transport, creating a cost crunch, experts said.
One silver lining is that off-contract spot rates are still about 25% higher than they were a year ago, due to thousands of drivers washing out of the industry.
"That's the cushion," said Croke. "If these rates weren't higher than last year, there'd be calamity. People would be screaming like they were in 2022, when diesel hit a record high that summer."
