For the second consecutive week, the national average price of diesel fuel continued to climb. According to a survey released by the Energy Information Administration, the average fuel costs per gallon stand at $5.339, nearly a 12-cent increase from the week of October 10. Since the beginning of October, the price of diesel has risen by over 50 cents. As a result, diesel now costs $1.668 more than at this point in October 2021.
The price had been dropping consistently along with the cost of gasoline, falling to $4.836 on October 3. However, while diesel rose, gasoline prices fell to a nationwide average of $3.871 per gallon, a decrease of just over 4 cents a gallon. However, like diesel prices, gasoline prices have risen considerably compared to last year, costing consumers an additional 54 cents per gallon.
Over the last year, diesel rates have soared to record highs. According to AAA, the national average for a gallon of diesel peaked at $5.81 in mid-June.
Most long-haul trucks and freight trains use diesel fuel to travel, proving how crucial diesel is for the transportation industry. Shippers will continue to feel additional consequences of price increases and will continue to see higher freight rates and fuel surcharges due to the increasing prices. With continued price increases in fuel and rising inflation and interest rates, prices for goods will likely stay high for the foreseeable future.
Causes of High Diesel Fuel Costs
Interest and inflation rates are not the only causes of higher fuel prices. The Russian invasion of Ukraine continues to affect gas and oil prices worldwide. Russia, the third-largest oil producer in the world, received historic sanctions from The United States, European Union, and other allies due to their unprovoked invasion. As a result, however, the world has experienced higher fuel prices. The longer the conflict continues, the longer the high prices are likely to remain.
Impacts of Increased Fuel Costs on Transportation
Rising diesel rates continue to take a toll on the transportation industry and other industries. One potential toll will be whether the usage rates will slow down. With fuel costs rising again, carriers and drivers tend to focus on shifting their driving frequency downward to save money. While truck drivers need to drive to make money, they also want to avoid spending significantly on the costs and services associated with the job. A slippery slope, to be sure.
The likely outcome will be that carriers will be strategic with their trips. They will also charge more.
Fuel Surcharges
In the trucking industry, fuel surcharges balance the fluctuations that come with the cost of fuel. Trucking companies (or third parties) charge this fee in addition to the cost of operations. The fuel surcharge changes based on the price of the fuel itself, meaning the more fuel prices increase, the higher the surcharge. The surcharge rises 0.50% for every $0.5 increase per gallon. Typically, fuel surcharges account for the average cost of transporting goods.
Another issue that arises during diesel increases is truck maintenance prices. Like all vehicles, trucks break down while on the road. Mechanics need to travel to disabled tucks, but like truck drivers, they also must balance the money spent to do the job. Their prices will continue to increase as well.
Rise in Inflation
This year’s rise in inflation has affected the economy, technology, and political landscape, let alone fuel prices. During the early stages of the COVID-19 pandemic in 2020, inflation fell to 1.4%. Over the past two years, however, that number has risen to 8.2%. Fuel costs (as a result of the previously mentioned Russian invasion of Ukraine) and supply chain issues have certainly contributed to the sharp rise. High prices have funneled through every stage of the economy, from manufacturers to shippers and, finally, to consumers. As a result of that rise, everything from a trip to the grocery store, shopping for the holidays, and filling up the gas tank has seen a price increase.
Transportation Freight Increasing Costs
As diesel prices continue to increase, carriers must also hike their prices to meet rising costs. If they do not, carriers will face bankruptcy and potentially lose their companies.
The increased fuel costs for carriers to transport freight also results in additional charges for shippers. Higher fuel surcharges will likely continue to keep up with the higher prices.
Freight Rates with PLS Logistics
At PLS Logistics Services, we understand that the still-rising diesel fuel costs can be frustrating for shippers and carriers. We will continue to provide the best options possible to overcome the present challenges. Through our innovative transportation management system, PLS Pro, and carrier network of over 55,000, we make efficiency and transparency a top priority for our customers. With more than 5,000 satisfied clients, we’ve redefined how making transportation easier doesn’t mean cutting corners. Get a free quote with us today to start your shipment!
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