Diesel costs squeeze trucking ahead of peak shipping season

The trucking industry is facing intense fuel cost pressures ahead of the holiday shipping season, with national diesel prices surging 70.7% year over year to $6.18 a gallon, according to the Department of Energy. Driven largely by geopolitical pressures and efforts by Iran and its allies to cut off key shipping lanes, the spike has left many fleets exposed to severe price volatility.

WiseTech Global data shows that average shipper fuel costs per mile increased 92%, lifting fuel to account for 22% of transportation spending compared to the long-term average of about 15%. Stephen Husk, director of data services at WiseTech Global, noted that carriers carry significantly more risk due to fuel surcharge delays tied to weekly DOE price indices. Fleets on flat, all-in rates absorb the increases directly, while others face cash flow problems from paying higher prices at the pump up front and being reimbursed weeks later.

Nathan Adams, vice president of transportation and procurement at Uber Freight, stated that carriers are increasingly reluctant to accept loads booked well in advance in the spot market due to weekly price fluctuations. On the contract side, carriers are unwilling to commit to longer-term pricing without adequate fuel surcharge mechanisms. Industry executives warn that persistent volatility could tighten capacity, complicate longer-term commitments, and produce larger rate increases if elevated prices continue into bid season.

Some carriers have chosen to avoid certain regions or long-distance moves, or exit entirely, further reducing capacity. Jason Wald, business development manager at Anderson Trucking Service, noted that capacity has tightened as fuel has risen, impacting smaller carriers heavily and potentially leading some to close. ATS ranks No. 31 on the Transport Topics Top 100 list of the largest for-hire carriers in North America. Lars Offerdahl, vice president of van operations at ATS, explained that fuel surcharges have a lag, causing carriers to lose money on the way up.

Summa Energy President John Tirado reported that fixed-rate contracts from older bids mean fleets are absorbing the entire increase, with every 10,000 gallons burned costing over $25,000 more than at the start of the year. Wholesale prices have moved 20 cents or more in a day 30 times this year, outpacing any surcharge. Dean Croke, principal analyst at DAT Freight & Analytics, pointed out that diesel costs impact longer lengths of haul and refrigerated shipping the most, accounting for about a fifth of the increase in trucking rates since last year.